UNITED STATES
SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10SB-12G/A
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-3479186
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3560 Cypress Gardens Road
Winter Haven, Florida 33884
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number (941) 326-1006
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Securities to be registered pursuant to Section 12(g) of the Act:
7,657,000 Shares of Voting Common Stock
Check here whether the issuer (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
As of September 30, 1999, the following shares of the
Registrant's common stock were issued and outstanding:
25,000,000 shares authorized, $0.001 par value
7,657,000 issued and outstanding
As of September 30, 1999, the following shares of the
Registrant's 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 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 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 during the
period from December 1998 through September 1999: Hardball 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
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new products should be introduced which would broaden the
Company's product base and potential for revenue growth.
The Company revamped its Lakeland restaurant and incorporated a
full service upscale concept. This restaurant operates under the
name "Mama Mia" and focuses on providing high quality Italian
food in a casual dining environment. Mama Mia was closed in
October 1999 for reconstruction and the restaurant reopened on
November 13, 1999.
The Company, opened an additional restaurant in New York
operating under the name "Floridino's Cafe" which provides
upscale sandwiches, soups, salads and personal size pizza. The
goal of this new restaurants is to serve authentic Italian
cuisine in a fast food environment. The restaurant was
temporarily closed during August 1999 for reconstruction and
reopened in September 1999.
Toho Holdings was organized in March 1999 for the purpose of
holding title to the Company's real estate assets and is a wholly
owned subsidiary of the Company.
The Company maintains and operates its 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. Zoop Soups was
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 which are sold at the Company's New York City
restaurant. 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 December 26, 1999. The
second restaurant opening in Lake Wales was delayed due to
problems in obtaining requisite permits and opened in May 2000.
These new restaurants will operate under the name "Floridino's
Fast Italian".
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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 Company has secured a lease for one location in Del Rey Beach
Florida, which is approximately 1,250 square feet. The second
location has been secured by the Company in Lake Wales, Florida
which is approximately 5,000 square feet.
The goal of the Company's new concept is to serve authentic
Italian cuisine in a fast food environment. This format
incorporates express style restaurants with customers being
served at the counter for carry out or on premises dining. An
upscale ambiance is incorporated into the concept to provide for
a casual dining experience in a warm, relaxed setting.
The Company does not focus on either metropolitan or rural areas
in selecting a location for its restaurants. Rather, it chooses
its location targeting areas which possess demographics of
generally 20,000 homes in a 3.25 mile radius. High traffic
locations are also considered meaning that such locations must
have at least 10,000 cars pass by the location per day. This
situates the restaurant in a location where it has public
exposure and which is easily accessible to customers.
The Company's sources of materials and ingredients for its
restaurants are obtained from food suppliers. The major
suppliers of the Company are Coca Cola, Bari Foods, Catilina Food
Ingredients, Sysco Foods, Rockets Red Glare and D & J Tomato Co.
These suppliers provide materials such as beverages, and
perishable goods such as sauces, meats, cheeses and bread
products for the Company's products.
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.
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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%)
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 new management
also believes that franchising the Company's name and its
products to individual operators throughout the Company will also
benefit the Company and provide an added source of revenue. The
Company is committed to developing a strong franchise system by
seeking experienced operators, by expanding its system in a
controlled manner and by closely monitoring the performance of
each franchisee to help insure adherence to the Company's
standards of operations.
In November 1998, the Company acquired complete ownership of two
New York entities, named "Zoop Soups Inc." and "Floridino's
Inc.". The purpose of acquiring these entities was to expand the
Company's operations into the New York area and to also allow the
Company to develop restaurants which will generate revenue for
the Company beyond the pasta industry. After the acquisition,
the Company merged the two entities and the surviving entity was
called "Floridino's, Inc.". The Company also hopes to gain a
seasonal source of revenue from the Zoop Soups concept which
focuses on the sale of specialized gourmet soups to the public
from its retail outlet stores. A major portion of the revenue of
Zoop Soups is generated during the winter months when the revenue
of the Company seasonally decreases.
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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. The frozen foods plant was inadequate as it
was unable to produce enough products to meet the projected
demand and to be capable of handling new management's aggressive
plans for growth and expansion of the frozen foods segment.
Packaging at the plant was also not standardized or efficient.
After a renovation of the plant and acquisition of new machinery
and equipment, the Company reopened the plant in November 1999
with the goal of commencing production of the Company's trademark
frozen food products such as its breakfast calzone, pazzo rolls
and frozen pizzas. The plant began receiving orders in January
2000.
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 and warehouse
structure 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 structure into a
state of the art manufacturing plant. These expansion plans
include a full-scale bakery, four separate production lines,
appropriate support facilities and corporate headquarters.
Completion is scheduled for the beginning of fourth quarter of
the year 2000, 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 plans
to raise funding for the expansion of the plant through either a
private placement of its common stock or through private debt at
a cost which is affordable to the Company.
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CONSULTANTS
Any relationship shall be with consultants shall be premised on a
performance based approach whereby the consultant will be allowed
to continue to oversee the daily operations of the Company so
long as it meets specified performance milestones set by the
Company. The consultant group shall also oversee the training of
staff, promotions and advertising. The Company believes this
will induce and inspire an aggressive management approach by a
consultant thereby effectuating positive results for the Company.
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 the Ephraim Group to oversee the entire
production facility and development of the Company's frozen food
line in May 1999. 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 upon execution of the
Agreement. The Company shall each year thereafter compensate the
Consultant provided certain profitability levels for the
production facility have been met, by providing the Consultant
with One Hundred Thousand (100,000) warrants each of which will
entitle the Consultant to purchase one share of restricted common
stock in the Company for a price of $2.00 per share during the
second year of the agreement, $3.00 per share during the third
year of the agreement and $4.00 per share during the fourth and
fifth year of the agreement. The warrants will not be granted or
vest to the consultant until the profitability levels for the
production facility have been achieved.
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The Ephraim Group has overseen the management of the frozen
foods division, been responsible for employee production and
hiring, conducted research into the Company frozen foods segment
and determined that a modernization of its production plant by
acquiring new machinery which would streamline the production of
the Company's products and increase its capacity. This would
allow the Company to pursue management's aggressive expansion
plans. The Ephraim Group has also consulted the Company on
organizing the manufacturing and engineering of the Company's
production process and has advised on the purchase of additional
equipment and freezers which would be conducive to the
modernization of the plant. The Group has also advised on the
segment's organizational structure, policies and procedures as
well as potential promotions of the Company's frozen food
products.
The Ephraim Group also engages in the research and development
for the Company in regard to the frozen foods segment. The
results of The Ephraim Group's research reflected that the
Company required a modernization of its production plant by
acquiring new machinery which would streamline the production of
the Company's products and increase its capacity. To this end,
the Company has expended approximately $456,000 to acquire new
machinery and modernize its plant in the first three quarters of
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 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.
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
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innovative market approach in order to develop and cultivate long
term growth for the Company with an aim at minimizing reliance on
any particular segment in the food industry.
The Company believes that competition in the frozen food category
is based on price, quality, marketing, sales, publicity, and
distribution. The Company finds competition in the frozen food
pizza market which is extensive and intense. Floridino's is
committed to producing a quality product in order to separate
itself from other competitors. It plans on utilizing only
premium ingredients for all of their products. It also believes
that it has identified a market niche and possesses the ideal
product to fill that void. Additionally, the Company seeks to
establish a pricing schedule which is in line with all of tile
competitive products being targeted.
The Company's finds that competition in the calzone market is
substantial. The two primary competitors manufacturing calzones
today are Stefanos and Pellegrinos. Both are regional companies
with limited distribution. Stefanos has found a niche in the
southeast region with distribution in a few respectable grocery
chains. The primary retailer for Pellegrinos is the Super
Wal-Mart chain of stores. Stefanos and Pellegrinos offer an
average product with fairly nice packaging. The product of both
these companies is machine made with the ingredients being
injected into the crust. Floridino's seeks to separate itself
from these competitors by providing a products with a homemade
look and with quality ingredients.
In the restaurant segment competition is fierce. There is an over
abundance of restaurants in the industry each offering a wide
array of themes and cuisine to choose from. The Company believes
that all such restaurants are compete for a share of the
incremental dollars consumers spend in dining out. Floridino's
seeks to separate itself by is staking out the upscale end of
this market and thereby separating itself from the current top
competitors in this arena. Floridino's believes that the
upscale self-service market has yet to be exploited. It strives
to do so by maintaining a clean, friendly, open and inviting
environment, appealing to consumers seeking quality food products
and by focusing on the preparation, presentation of its foods and
service.
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ADVERTISING AND MARKETING
The Company is currently advertising its restaurants through
newspapers, diner coupon books and through hotels in areas which
are in close proximity to each respective restaurant. The
Company believes that this will be the most cost effective method
to attract interest to the restaurants and first time visitors
for the purpose of gaining their repeat business. The Company
intends on researching the possibility of advertising its stores
on the radio market. In doing so, it will assess the cost of
such advertising with the potential for drawing additional
customers. The Company's frozen food products are currently
being promoted to national food chains and supermarkets on an
individual basis. Additionally, the Company has participate in
various trade and food shows to display its products and attract
purchaser interest. Where the Company is able to identify a
potential purchaser of its frozen foods, it intends on shipping
to such potential purchaser a sample of its products in order to
attract their interest.
SUBSIDIARIES
The Company has seven (7) subsidiaries 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.
The Company's frozen foods segment has the following
subsidiary: "Floridino's Specialties Inc" which 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." which oversees the Company's
franchising and licensing of the Company's concept, trademark
products and recipes.
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The Company has another wholly owned subsidiary,"Toho Holdings,
Inc.", which holds title to 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 sold two of these
parcels in January 2000 for net proceeds of $89,000 for the
purpose of acquiring additional funds to assist with the
expansion and further development of the Company. A third parcel
of land 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 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. Another subsidiary, Floridino's of Lakeland was
temporarily closed for reconstruction and reopened in November
1999.
TRADEMARKS AND SERVICE MARKS
The Company also is the owner of various trademarks and service
marks which are utilized by the Company in the course of its
business. The service mark "Home of the World's Largest Calzone"
is utilized to promote the Company's restaurant division and also
the frozen foods division. The service mark "Floridino's" is
used to promote all three of the Company's divisions which
utilize the Floridino's name. The service mark "Zoop Soups" was
acquired by the Company during the course of its acquisition of
Zoop Soups Inc., and is used to promote the Zoop Soups concept in
the restaurant operated by the Company in New York City. The
trademark "Everything's Going Pazzo at Floridino's" is used to
promote the Company's restaurant division and also by the
franchisees under the terms and conditions of their respective
Franchise Agreements. The Company has also filed an application
for the registration of the service mark "Fast Italian" which is
currently pending. The Company has assigned no value to
trademarks or service marks in the financial statements.
As of September 30, 1999, there were approximately 55 employees
of the Company. Within the next year, and as the Company opens
additional restaurants and expands its frozen food segment, the
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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.
Item 2. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
As noted by our auditors report dated October 12, 1999 on the
financial statements as of December 31, 1998 and December 31,
1997, 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 plans to address this issue were to close all
unprofitable restaurants during fiscal 1999 and to raise
additional capital through a private offering. These funds were
to be used to satisfy outstanding debt of the closed restaurants,
to fund the reconstruction of the frozen food processing plant in
order to satisfy the demand requirements of the potential buyers
of the Company's products, and to hire experienced employees and
independent contractors to manage and upgrade the existing
restaurant segment and frozen food plant. It is estimated that
the Company will need approximately $100,000 to finish
construction of the frozen food plant and approximately $159,000
to satisfy debt still outstanding attributable to the borrowings
of the closed restaurants.
However, it cannot be reasonably assured that the Company will
achieve profitability even if the food processing plant does
become operational as expected in January 2000. It also cannot
be assured that the remodeling and reconfiguring of the
restaurant segment will result in the Company achieving
profitability in the coming fiscal year.
During the nine months ending September 30, 1999, the Company
raised $1,000,000 in a private offering of common stock and
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$500,000 in a debenture offering and $346,500 upon the exercise
of common stock warrants. The Company used the proceeds to
satisfy approximately $166,000 of outstanding long-term debt
attributable to the closed restaurants. As of the date of this
report, $159,112 of debt, which is currently in default, of the
closed restaurants remains unsatisfied. The resolution of this
debt is currently being negotiated with the bank and management
expects to have this debt settled in fiscal year 2000. The
restaurant equipment of the closed restaurants is being used to
secure this debt. In addition, the Company used approximately
$320,000 of the proceeds acquired to purchase the land adjacent
to the food processing plant in order to satisfy future expansion
plans. The Company expended approximately $775,000 dollars
during this time in order to upgrade the plant facility and
existing restaurant space. In the fourth quarter of fiscal 1999,
the capital project for the plant was completed and a product
testing phase from potential customers began. The plant became
operational in November 1999 and began receiving orders for its
product in January 2000.
In addition to the plant improvements and equipment acquisitions,
the New York restaurant and the Lakeland restaurant underwent a
period of reconstruction in 1999. The restaurants were closed in
August 1999 and October 1999, respectively, for reconstruction.
The New York restaurant was reopened in September 1999 and the
Lakeland restaurant was reopened in November 1999.
As of September 30, 1999, the Company's restaurant equipment was
used to secure capital leases in the amount of $233,415. The
capital leases mature on dates ranging from January 2004 through
February 2005 and carry interest rates ranging from 16.80% to
27.30%. The Company also has debt outstanding that is secured by
the Company's building assets in the amount of approximately
$440,000. Approximately $182,000 of the debt is due in fiscal
year 2000 and carries an interest rate of 9%. Approximately
$258,000 of this debt is due in June 2007 and carries rates
ranging from 9% to 10%.
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
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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
$1.8 million which has been used to revamp and reconstruct the
Company's operations and to satisfy debt of the closed
restaurants. These funds have been used to modernize the
Company's frozen foods 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 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 of September 30, 1999, the process of closing the
unprofitable restaurants was completed. As a result the Company
shut all of its existing restaurants. After a month of
reconstruction, the Company reopened its only full service
restaurant in Lakeland, Florida and Floridino's Cafe in New York,
New York. The Company has opened two additional restaurants in
the Florida area. The Del Ray restaurant was opened in December
1999 and the Lake Wales restaurant was opened in May 2000.
Funding of the Company's reconstruction and revamping has been
undertaken primarily through the private sale of equity and
debentures in the Company. In September 1999, the Company
received proceeds of $500,000 from a debenture offering. The
debentures are convertible into common stock within one year of
purchase at a 40% discount from the preceding five day average of
the prevailing market price of the stock at conversion. The
debentures are payable in September 2001 and carry interest
computed at 9.00% payable semi-annually.
The funds were also used to repay approximately $166,000 of
previous debts of the closed restaurants, acquire new property
and equipment and machinery for the development of the Company's
frozen food plant and for the allocation of costs associated with
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the reconstruction of the Company's new restaurants.
The Company believes that it has the capacity to raise additional
funds if and when they are required. Additional funds may be
raised through the sale or mortgaging 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 will enable the Company to secure a line of
credit with a financial institution.
During the next year, the main source of revenue for the Company
is expected to be that generated through the frozen food segment
as it is this segments that the Company has primarily focused on
during its revamping and reconstruction of operations. The
primary expenses, which the Company has incurred during the
reconstruction of its operations, have been associated with the
purchase of new equipment and machinery for its frozen food
segment and for the development of its production plant in
Lakeland, Florida.
Material commitments for capital expenditures include
approximately $100,000 for an upgrading and completion of the
Company's production facilities as it relates to its frozen food
plant. Sources of funding for this expenditure include those
derived from the Company's sale of the two parcels of real
estate. The two parcels were sold on January 15, 2000 for
$409,000. After mortgage satisfaction of $320,000 the Company
realized proceeds from this sale of $89,000. Additional sources
of funding may 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.
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A third parcel of land, also in Winter Haven, Florida, is
currently been listed in the market however the Company has not
entered into any Contract of Sale for this property. The property
is being listed for $139,000 and has mortgages of approximately
$56,000.
In the opinion of management, inflation at this time has not and
will not have a material effect on the operations of the Company.
Management focuses on the long term growth of the Company and
therefore any increase in inflation or jump in the price of raw
goods purchased by the Company will not result in an immediate
increase in prices to the consumer. Management believes that a
increase in its prices may lead to a loss of customers and
therefore hinder the Company's long term growth. At any course
however, management will evaluate the possible effects of
inflation on the Company as it relates to its business and
operations and proceed accordingly.
The Company would consider raising its prices in the event there
is a significant increase in the cost of labor. As of September
30, 1999, there were approximately 55 employees of the Company.
Within the next year, and as the Company opens additional
restaurants and expands its frozen food segment, the Company will
hire additional employees. As the number of employees increases,
any rise in the cost of labor will have a more significant impact
on the Company which may in turn cause the Company to increase
its prices.
The Company's viability to generate revenue and income is
dependent on the successful implementation of its new upscale
restaurant concept and the ability to produce quality frozen food
products at its production plant. However, it cannot be assured
that the Company will achieve profitability even in the event
that management's plans are successfully implemented.
The Company's operating history, including its losses and
revenues, primarily reflect its operations for the past two
fiscal years and the nine month period ending September 30, 1999.
The Company had for the year ending December 31, 1998 $1,669,271
in revenue and a net loss of $519,187. As of December 31, 1998
the Company had a net shareholder deficit of $370,560. For the
year ending December 31, 1997, the Company had revenues of
$1,561,494 and a net loss of $256,342. Stockholders' deficit was
$536,894 at December 31, 1997. For the nine months ending
September 30, 1999, the Company had gross revenues of $872,087, a
net loss of $886,243, and stockholders' equity of $997,531.
16
<PAGE>
General Statement - Factors that may affect future results
With the exception of historical information, the matters
discussed in Management's Discussion and Analysis of Financial
Condition and Results of Operations contain forward looking
statements under the 1995 Private Securities Litigation Reform
Act (the "Reform" Act) that involve various risks and
uncertainties. Typically, these statements are indicated by
words such as "anticipates", "expects", "believes", "plans",
"could", and similar words and phrases. Factors that could cause
the Company's actual results to differ materially from
management's projections, forecasts, estimates and expectations
include but are not limited to the following:
- Ability of the Company to raise additional capital
- Ability of the Company to secure sales agreements
for its processing plant products
- Unexpected economic changes in the United States
- The imposition of new restrictions or guidelines by
the United States Department of Agriculture
To the extent possible, the following discussion will highlight
the relative needs of the Company with respect to its business
activities.
I. Segment Reporting Disclosures
The Company's sales are generated from two business segments:
restaurants and franchising, and frozen 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 Italian foods. During
1999, the Company opened two restaurants after a period of
reconstruction and staff reorganization, Floridino's, Inc., and
Floridino's of Lakeland, Inc.
The food processing plant was completed in 1999 and began
receiving orders in January of 2000. During 1999, the processing
plant was being reconstructed to conform to USDA guidelines and
to the requirements of potential customers. The potential
customers for the Company's processing plant products are large
retail restaurants and fast food outlets. Based upon the results
of the initial testing phase required by the potential buyers of
the Company's product, it became clear that the plant would not
17
<PAGE>
be able to meet the expected demand that was estimated. In order
to meet the anticipated demand that was estimated the plant had
to be refitted and upgraded. This period of upgrade was
completed in late 1999 and all requirements regarding the plant
had been satisfactorily met.
Please see the discussion and analysis that follows.
Comparison of nine months ending September 30,1999 to nine months
ending September 30, 1998:
Restaurant Segment: Results of Operations
The restaurant segment has significantly changed when comparing
the nine months ending September 30, 1999 to the nine months
ending September 30, 1998. From November 1998 through September
1999, the Company was in the process of closing its restaurants
in order to implement management's plan previously described.
During the 1998 period, the Company was operating six
restaurants. During the period, five of these restaurants were
closed. Two restaurants, Lakeland and Floridino's Inc remained
opened during the period, except during August 1999 when
Floridino's Inc. was closed for reconstruction. See the outline
below for discussion of management's reorganization efforts from
November 1998 through September 1999.
Floridino's Pizza Etc., Inc.- a restaurant located in
Winterhaven, Florida that was closed in September 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 of Bartow, Inc.- a restaurant located in Bartow,
Florida that was closed in the fourth quarter of 1998.
Floridino's of Lake Wales- a restaurant closed in the fourth
quarter of fiscal year 1998.
Floridino's, Inc.- a restaurant located in New York, New York
that had been acquired in November 1998. The restaurant was
closed during August 1999 for reconstruction and reopened in
September 1999.
18
<PAGE>
Floridino's of Lakeland, Inc. - a restaurant located in Lake
Wales, Florida incorporated in September 1997. Lakeland had
acquired all the assets and liabilities of Lake Wales when that
restaurant was closed. The restaurant was closed in October 1999
for a period of reconstruction and was reopened in November 1999.
The effect of management's efforts to increase profitability by
closing unprofitable restaurants and to re-organize open
restaurants to adhere to management's new "fast Italian" theme
and their results of operations are discussed below.
Gross sales for the nine months ending September 30, 1999 for the
restaurant division decreased to $840,481 or 38% from $1,364,051
in gross sales for the similar period in 1998. Consequently
gross profits for the nine months ending September 30, 1999
decreased to $324,259 or 40% from $544,923 as compared to the
similar period in 1998.
During the nine month period ending September 30,1998, the gross
sales of the restaurants that were being closed totaled
approximately $1,005,000. During the nine-month period ending
September 30, 1999, these same restaurants generated
approximately $403,000 in sales, or approximately 48% of gross
restaurant sales. Approximately $160,000 of gross profits during
the first nine-months of fiscal year 1999 are attributable to the
closed restaurants, or 49% of gross profits from restaurant
sales.
Gross profits as a percentage of total revenues decreased to 38%
for the nine month period as compared to 40% in the nine month
period ending September 30, 1998. The decrease in gross profits
is mainly attributable to the increased depreciation expense
resulting from the significant increase in capitalized
reconstruction costs of the restaurants, in addition to the
assets acquired by the Company in the purchase of Floridino's
Inc. in November 1998. For the nine months ending September 30,
1999, depreciation expense was approximately $126,000 for the
segment as compared to approximately $52,000 for the nine months
ending September 30, 1998.
General and administrative overhead for the restaurant division
$586,754 for the nine month period ending September 30, 1999 as
compared to $907,150 for the nine month period ending September
30, 1998, a 35% decrease. Management expects general and
administrative expenses for the segment to continue to decrease
as compared to prior periods since approximately $271,000 of
general and administrative overhead, or 46%, for he nine month
19
<PAGE>
period ending September 30, 1999 is attributable to the
restaurants that were in the process of being closed.
In addition to the effect on general and administrative overhead
of the closed restaurants, general and administrative overhead
was incurred during the period of reconstruction for the New York
restaurant. Management decided to retain many of its employees on
salary during this period. Management estimated that the costs
of hiring and training new employees at the end of the
reconstruction period would have been greater than the costs of
keeping the employees on salary during the reconstruction period.
The Company spent approximately $120,000 in general and
administrative overhead attributable to the two restaurants
during the reconstruction period.
After selling, general, and administrative costs, the segment
showed a loss from operations of $262,495 as compared to a loss
of $362,227 for a similar period in 1998, a decrease in operating
losses of 28%.
As of September 30, 1999, the assets of the restaurant division
increased to $1,096,126 as compared to $353,397 at September 30,
1998, an increase of 142%. The main reasons for the increase are
the acquisition of $394,000 of assets by purchasing Floridino's
Inc. in November 1998 and the capitalized reconstruction costs of
Floridino's N.Y and Lakeland of approximately $319,000 during the
first nine months of fiscal year 1999.
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. However, the future
profitability of this segment cannot be assured even upon the
successful implementation of management's plans previously
described.
Franchise revenues for the nine months ending September 30, 1999
decreased to $53,065 from $86,654 earned for the similar period
in 1998. This was a result of a decrease in the number of
franchisees of eleven in 1998 to four as of September 30, 1999.
Management feels that fall in franchise sales are directly
related to the restaurant concepts that had proved unsuccessful
in fiscal 1998.
20
<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
reconstruct this segment during 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 nine-month period ending September 30, 1999, the
segment incurred losses of $360,061 in the operation of the
plant. The significant components of this cost were $178,247 for
plant salaries and consulting fees, $128,123 for supplies and
utilities, and $22,775 in depreciation expenses.
The plant staff had been on salary since the first quarter of
1999. The plant became operational in the last quarter of 1999
and began taking orders in January 2000. The gross sales and cost
of sales figures generated reflect the results of test sales
performed in September 1999 to potential customers of the
Company's products.
Assets for the segment increased to $431,680 during the nine
months. This increase represents the purchase of equipment and
capitalized construction costs incurred through September 30,
1999, net of depreciation.
Consolidated results of operations:
On a consolidated basis, corporate overhead increased to $236,924
through September 30, 1999 from $ 141,979 for the similar period
in 1998, or an increase of 67%. The main component of this
increase were accounting and legal fees attributable to the
Company's financial public reporting requirements.
The Company recognized an unrealized gain in short term
marketable investments of $160,929 as a result of the purchase of
Cantebury Investing (CITI). The investment is made for
21
<PAGE>
speculative purposes and is classified as a trading security as
per SFAS 115. The Company intends to sell this investment during
the first quarter of fiscal 2000. Interest costs represent the
cost of borrowings on the capital leases. During the nine months
ending September 30, 1999, the Company was successful in
negotiating a settlement of outstanding debt with a bank for
approximately one half of the carrying value of the debt. The
debt is attributable to the borrowings of the closed restaurants.
As a result, the Company has recognized a gain on the early
extinguishments of this debt of $63,634 net of tax effect.
After deducting interest costs of $16,826 and the recognition of
the favorable settlement of the Company's long-term debt, the
Company realized a net loss of $651,743 or $.11 per share as
compared to a loss of $516,132 or $.20 per share for a similar
period in 1998, a 45% decrease in loss per share.
Discussion of Financial Condition- Liquidity and Capital
Resources
At September 30, 1999, the Company had working capital of a
deficit of $278,133 as compared to a deficit of $855,053 at
December 31, 1998. The main components of the increase in
working capital are the funds received from the private sale of
stock and warrant exercises of approximately $1.3 million, the
funds received from the debenture offering of $500,000, the
recognition of $333,334 of debt discount on the debenture
offering, and net losses of approximately $652,000.
On a consolidated basis, the Company had cash balances totaling
$187,480 as compared to $15,502 at December 31, 1998. This
increase in cash is primarily due to the private offering of
2,000,000 shares of common stock in May 1999 for $1 million and
the issuance of $500,000 in convertible debentures in September
1999 and $346,500 raised by the exercise of common stock warrants
less property and equipment purchases of $375,153 and cash
operating losses of $692,422.
Royalties receivables have increased to $16,304 in September 30,
1999 as compared to $11,826 at December 31, 1998. The Company is
currently experiencing collection problems with these
receivables. If these problems cannot be rectified in the fourth
quarter of 1999, the Company will consider writing off the
receivables to bad debt expense.
22
<PAGE>
Total current liabilities increased to $753,881 at September 30,
1999 as compared to $897,464 at December 31, 1998. The slight
decrease is mainly a result of lower vendor payables because of
fewer operating restaurants this year as compared to last year.
The capitalized costs of property, equipment, and lease
improvements increased $1,733,596 to $2,458,864 at September 30,
1999. During the nine months, capital expenditures were
approximately $456,000 in the acquisition of plant equipment and
plant construction for the frozen food processing segment,
$319,000 for re-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. The Company sold two of the buildings
acquired in January 2000 from an officer of the Company in
exchange for preferred shares, for $409,000 in order to raise
capital for the Company. 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 $233,416 at
September 30, 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 frozen food processing
segment. Notes and mortgages increased to $875,294 at September
30, 1999 from $385,312 at December 31, 1998 as a result of the
assumption of real estate mortgages in the preferred stock
transaction noted above of approximately $440,000.
Stockholders equity increased to $997,531 at September 30, 1999
from a deficit of $370,560 at December 31, 1998. The main
sources of this increase were $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, and the
recognition of $333,334 as a favorable conversion feature from
the debenture offering in September 1999, $346,500 in proceeds
from the exercise of common stock warrants, and a net loss during
the nine month period of approximately $652,000.
Management expects the Company to realize the benefits of its
reorganization efforts in fiscal year 2000. Management feels the
processing plant is substantially complete and the plant began
operations in January 2000. The closing of unprofitable
restaurants and reconstruction of the existing restaurant segment
is complete and operations are underway. Additional restaurants
will be added depending upon the success of the restaurant's new
marketing efforts established in 1999. However, no assurance can
be given as the realizations of management's expectations.
During the balance of fiscal year 1999, the Company projects to
spend approximately $100,000 in plant construction cost and plant
equipment acquisitions. In addition, the Company intends to
purchase the plant building structure, which is currently being
leased. The estimated cost of this expenditure is $220,000.
The sources of funds for these expenditures are expected to be
$250,000 upon the completion of the debenture offering.
Additional funds are expected from the sale of the buildings
acquired from the Company's president in exchange for preferred
stock. Additional sources of funds are the Company's investment
in common stock which is valued at approximately $259,000 at
September 30, 1999.
Management expects the frozen food segment to grow significantly
in the coming fiscal year 2000. The Company intends to hire an
aggressive sales force to market its frozen food products once
the plant becomes operational, although management cannot
reasonably assure that its marketing efforts will be successful
or this eventuality.
The implementation of management's plans regarding the restaurant
segment is complete. Management has negotiated for restaurant
space in order to open additional restaurants that emphasize the
"fast Italian, self-service" theme. The Del Ray restaurant
opened in December 1999 and the Express restaurant opened in May
2000.
The Company intends to emphasize its new self-service fast casual
concept as a franchise. The Company intends to support and train
new franchisees for a fixed fee and a percentage of gross
revenues. The intention being to generate franchise fee revenues
and additional demand for its frozen food products, but without
the significant investment needed to open and operate a
restaurant.
Of course management's plans are dependent upon additional
capital being available from the sources outlined above. It
cannot be assured that these sources, such as the building real
estate and the investment in common stock, will be eventually
realized at their values disclosed at September 30, 1999. Nor
can it be assured that even if the planned expenditures and
upgrades are made, that profitability of the frozen food segment
and the restaurant segment can be achieved.
24
<PAGE>
Comparison of fiscal year ending December 31, 1998 to fiscal year
ending December 31, 1997:
The Company had only the restaurant segment operational during
the period January 1, 1997 through December 31, 1998. The
following is a comparative discussion of the results of
operations for the fiscal years ending December 31, 1998 and
December 31, 1997.
Results of operations:
For the year ended December 31, 1998, food and beverage sales
increased to $1,577,564, a 7% increase over comparable sales
revenues for fiscal year 1997. Revenues from royalties and
franchise fees increased slightly to $91,707 during fiscal 1999
as compared to $83,298 for fiscal year 1997, an increase of 10%.
However, the number of franchises decreased from 9 to 8 during
this fiscal year. In spite of an aggressive effort by management
to increase its franchises, the Company was unsuccessful in its
efforts and, in fact, lost a franchise during the year.
Management is concerned by this failure and is currently
evaluating the situation with the intention of changing the
marketing strategy it has used. The eventual success or failure
of this effort cannot be reasonably predicted, however, should
this trend continue, revenues from franchises and royalties will
continue to decrease in the future.
Total revenues increased to $1,669,271 in fiscal year 1999 as
compared to $1,561,494, an increase of 7%.
Gross profits climbed to $636,326 in fiscal year 1998 as compared
to $605,079 in fiscal year 1997, an increase of 5%. Gross
profits as a percentage of total revenues fell slightly in fiscal
year 1998 to 38% from 39% in fiscal 1997. The decrease is mainly
the result of higher salary costs charged to cost of goods sold
resulting from the increase in employees at the Company's
restaurants during fiscal year 1998.
General and administrative expenses increased to $996,232 in
fiscal 1998 from $807,046 in fiscal 1997, a 23% increase. Most
of the increase was due to the increase in administrative payroll
and professional fees. Administrative payroll increased
approximately $75,000 due the additional hiring of a corporate
payroll clerk and corporate accountant. Professional fees
increased approximately $55,000 as a result of higher legal costs
incurred in fiscal 1998. The Company became involved in various
25
<PAGE>
lawsuits from suppliers during the year and as a consequence,
legal fees increased as a result of the Company defending itself
against these various lawsuits.
During the fiscal year 1998, the Company closed the operations of
the Bartow restaurant. The cost of this store closing includes
severance pay, lease cancellations, and overhead incurred while
the store was idle. Total costs attributable to the closing is
$138,555.
Interest expense for fiscal 1998 decreased slightly to $29,322
from $31,842, or 7.9%, in fiscal year 1997.
After operating expenses and interest expense, the Company showed
a loss from continuing operations of $519,187 in fiscal year 1998
as compared to a loss of $256,342 for fiscal year 1997, a 103%
increase in loss. This resulted in basic loss per share of $.19
in fiscal year 1998 as compared to a basic loss per share of $.10
in fiscal year 1997, or a 90% increase in basic loss per share.
Discussion of Financial Condition- Liquidity and Capital
Resources
The Company had a cash balance of $15,502 at December 31, 1998 as
compared to a zero cash balance at December 31, 1997. However
when outstanding checks in excess of cash balances are included,
the net cash balance at December 31, 1998 was an overdraft of
$4,401 as compared to an overdraft of $1,144 at December 31,
1997.
The decrease in net cash balance at the end of fiscal year 1998
was due to a combination of a cash loss from operations of
approximately $380,000, the sale of restaurant equipment for
approximately $39,000, the issuance of common stock for $261,000,
a loan from a stockholder of approximately $132,000, and the
payment of long term debt and loans from suppliers of
approximately $55,000.
In November 1998, the Company acquired 100% of the outstanding
stock of Floridino's Inc. and Zoop Soups in exchange for
1,680,000 shares of common stock. At the date of the
acquisition, the Company acquired approximately $395,000 of
assets and about $58,000 of current liabilities. The results of
operations of the acquired entity for November and December of
1998 are included in the income statement for fiscal year 1998.
Management subsequently closed the Zoops restaurant and
transferred its assets and liabilities to Floridino's Inc.
26
<PAGE>
In addition, the Company incorporated Floridino's Specialties
Inc. during the fiscal year. The entity is located in Lakeland,
Florida but has no operating activity or assets at December 31,
1998. The Company intends to operate a frozen food processing
plant through "Specialties" and intends to begin the acquisition
and reconstruction of the plant in fiscal year 1999.
The working capital of the Company decreased to a deficit of
$855,053 at December 31, 1998 from a deficit of $448,268 at
December 31, 1997, or a 91% decrease. Approximately $313,000 of
long-term debt at December 31, 1997 becoming currently payable at
December 31, 1998. This accounts for the significant decrease in
working capital.
Total assets increased to $641,198 at December 31, 1998 from
$268,618 at December 31, 1997. This increase of 139% is mainly
attributable to the fixed and other assets acquired in the
purchase of Floridino's N.Y. and Zoop Soups in November 1998.
The Company's debt at December 31, 1998 amounts to approximately
$385,000, of which approximately $313,000 is due within fiscal
year 1999.The debt carries interest rates ranging from 9% to
11.25%. Approximately $130,000 of debt is in default at December
31, 1998, which managements intends to negotiate to a resolution
if fiscal 1999. Approximately $212,000 of the debt is secured by
the Company's equipment.
Total stockholders' equity increased to a deficit of $370,560 at
December 31, 1998 as compared to a deficit of $536,894 at
December 31, 1997. The increase in stockholders' equity of
approximately $166,000 is mainly attributable to the net loss in
fiscal 1998 of approximately $519,000, the issuance of 261,000
shares of common stock upon exercise of warrants for $261,000,
the issuance of 1,680,000 shares of common stock for net assets
of approximately $337,000, and the issuance of 500,000 shares of
common stock for fixed assets valued at approximately $87,000.
The Company's need for working capital in fiscal year 1999 is
quite significant in light of the Company's working capital
deficit of $855,053 and the net loss for the fiscal year 1998 of
$519,187. Management estimates that the Company will need
working capital of $300,000 for restaurant reconstruction,
$500,000 to complete reconstruction of the frozen food processing
plant, and $313,000 to satisfy debt outstanding that will come
due in fiscal year 1999. It is reasonable to predict that the
Company will continue to incur significant operating losses in
fiscal 1999, however the amount cannot reasonably be ascertained
27
<PAGE>
at this time. However the effects of the expected losses from
operations will certainly put further pressure on working capital
resources in fiscal year 1999.
In order to raise the working capital that is estimated to be
needed, management intends to execute a private offering of
shares for $1,000,000 in the early part of fiscal year 1999.
Further sources of capital may come from 558,000 warrants yet
outstanding at December 31, 1998 as a result of the share
offering in July 1997. The warrants are exercisable at $1 per
share and the maturity date was extended to March 1999.
Management may consider lowering the exercise price in order to
induce warrant holders to exercise the warrants therefore the
proceeds from exercise of the warrants cannot be accurately
predicted.
In view of the significant losses incurred by the Company through
fiscal year 1998, the Company's working capital deficit, and the
auditors' concerns regarding the Company's ability to operate as
a going concern, the future success of management's plans and the
continued existence of the Company cannot be reasonably assured.
YEAR 2000 DISCLOSURE
The Company did not experience any problems related to the year
2000.
28
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA SCHEDULE
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
FINANCIAL DATA SCHEDULE
<TABLE>
<CAPTION>
For the Year From the Year
Ended Ended
Dec. 31, 1998 Dec. 31, 1997
------------- -------------
<S> <C> <C>
Cash and Cash Items $ 15,502 $ 0
Marketable Securities 0 0
Notes and Accounts Receivable 11,826 12,250
Allowances for doubtful accounts 0 0
Inventory 15,083 18,535
Other Current Assets 0 0
Total Current Assets 42,411 30,785
Property, plant and equipment 725,268 336,379
Accumulated depreciation -213,246 -130,408
Total assets 641,198 268,618
Total current liabilities 897,464 479,053
Bonds, mortgages and debt
Net of current portion 71,584 326,459
Preferred stock - redemption 0 0
Common stock 4,959 2,518
Other stockholders' equity (375,519) (539,412)
Total Liabilities and
Stockholders' equity 641,198 268,618
Net Sales of Tangible
Products 1,577,564 1,478,196
Total Revenues 1,669,271 1,561,494
Cost of Tangible Goods Sold 1,032,945 956,415
Total Costs and Expenses
Applicable to sales
and revenues 1,134,787 872,648
Other costs and expenses 0 0
Provision for doubtful accounts 0 0
Interest and amortization of
Debt discount 29,332 31,842
Income before taxes and
and other items (519,187) (256,342)
Income tax expenses 0 0
Income/loss continuing
operations (519,187) (256,342)
Discontinued operations 0 0
Extraordinary items 0 0
Cumulative Effect - changes in
Accounting principles 0 0
Net Income or loss (519,187) (256,342)
</TABLE>
<PAGE>
<PAGE>
Item 3. DESCRIPTION OF PROPERTY
As of December 20, 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. This parcel and the parcel
described in (i) above have been sold on January 15,
2000 for $409,000.
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
the location of the Company's Lakeland restaurant.
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 property and equipment as
of September 30, 1999 are as follows:
Equipment $737,826
Leasehold Improvements 735,116
Buildings 639,000
Vehicles 17,232
Furniture 9,690
Land 320,000
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<PAGE>
The Company also is the owner of various trademarks and service
marks which are utilized by the Company in the course of its
business. These are as follows: The service mark "Home of the
World's Largest Calzone" bearing ser. no. 74-468,809 and filed
December 143, 1993; The service mark "Floridino's" bearing ser.
no. 74-468,810 and filed December 13, 1993; "The service mark
"Zoop Soups"; The trademark and design of "Floridino's, Home of
the World's Largest Calzone" and the trademark and design of
"Everything's Going Pazzo at Floridino's". The Company has
assigned no value to its trademarks and service marks in the
financial statements.
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth the information, to the best
knowledge of the Company as of December 1, 1999, with respect to
each person known by the Company to own beneficially more than 5%
of the Company's outstanding common stock, each director of the
Company and all directors and officers of the Company as a group.
The Company also provides beneficial ownership information with
respect to each of its executive officers.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
---------------- -------------------- --------
William Keeler 3,000 0.00%
5836 Spruce Creek Drive
Fort Orange, Florida
Michael Floridino 999,700 13.02%
3560 Cypress Gardens Road
Winter Haven, Florida 33884
Hynford Holdings Ltd. 500,000 6.53%
Cable Beach Court - STE #1
Nassau, Bahamas
Toho Ventures Ltd. 1,680,000 21.94%
494 LaGuardia Place
New York, New York 10012
George Pirgousis (3) 286,000 3.74%
494 LaGuardia Place
New York, New York 10012
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Nick Pirgousis(1) (2) 1,304,000 17.03%
494 LaGuardia Place
New York, New York 10012
Frank Dolney(1) 840,000 10.97%
494 LaGuardia Place
New York, New York 10012
William Scott 40,000 0.53%
95 Madison Avenue
Morristown, New Jersey
Lokee LLC 142,000 1.88%
494 LaGuardia Place
New York, New York 10012
Raffles Toho Ltd. 464,000 6.13%
494 La Guardia Place
New York, New York 10012
All Directors and Named
Executive Officers as
group 3,469,700 45.32%
PREFERRED SHARES
Michael Floridino 50,000 100.00%
3560 Cypress Gardens Road
Winter Haven, Florida 33884
(1) As of December 1, 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 1, 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 1, 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
33
<PAGE>
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.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS
Position(s) Held and
Name Age Duration of Service Family Relation
---------------- --- ------------------- ---------------
William C. Keeler 46 Chief Executive Officer None
Michael Floridino 41 President None
Frank Dolney 43 Secretary/Treasurer None
Nick Pirgousis 44 Chairman of Board Brother of
George Pirgousis
George Pirgousis 58 Director Brother of
Nick Pirgousis
William A. Scott 55 Director None
All directors hold office until the next annual meeting of
stockholders, held on 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.
34
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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. Mr. Scott has
served on the board of directors since March 1999.
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.
Mr. Floridino has served on the board of directors since 1997.
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. Mr. Dolney has served on the
board of directors since January 1999.
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<PAGE>
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. Mr. Pirgousis has served on the board
of directors since January 1999.
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. Since 1982, he has owned and
operated two restaurants in New York, New York. He has served on
the board of directors since January 1999.
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;
36
<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.
37
<PAGE>
Item 6. EXECUTIVE COMPENSATION
SUMMARY
The following table summarizes the total compensation awarded or
paid by the Company to its president, for the fiscal year ended
December 31, 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.
<TABLE>
Summary Compensation Table
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Other Restricted Sec. All
Principal Annual Stock Underly. LTIP Other
Position Year Salary Bonus Compen. Award Options Payouts Comp.
Michael
Floridino
President 1999 $75,000 0 0 0 0 0 0
The Company has not had a bonus, profit sharing, or deferred
compensation plan for the benefit of its employees, officers or
directors. The Company has no plans at the present to compensate
its directors.
The Company has not issued any shares of its common or preferred
stock to any employee. It has issued shares to The Ephraim Group
and to William Scott as consultancy services rendered to the
Company.
COMPENSATION TABLE: None
CASH COMPENSATION
There was no cash compensation paid to any director or executive
officer of the Company during the two fiscal years ended
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.
38
<PAGE>
OTHER COMPENSATION: None.
COMPENSATION OF DIRECTORS: None.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENT:
There are no compensatory plans or arrangements of any kind,
including payments to be received from the Company, with respect
to any person which would in any way result in payments to any
such person because of his or her resignation, retirement, or
other termination of such person's employment with the Company or
its subsidiaries, or any change in control of the Company, or a
change in the person's responsibilities following a change in
control of the Company.
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) On November 1, 1998, the Company issued 1,680,000 shares of
restricted common stock, subject to Rule 144, to Toho Ventures
Ltd., in exchange for 200 shares of common stock of Zoops Soups,
Inc., representing 100% of the outstanding and issued stock in
the company; and 200 shares of common stock of Floridino's, Inc.,
representing 100% of the outstanding and issued stock in the
company. The two entities were combined into one entity called
Floridino's Inc, which became a wholly owned subsidiary of the
Company. Toho Ventures Ltd., is a company whose majority
shareholder is Nick Pirgousis, the Chairman of the Board of
Directors of Floridino's International Holdings Inc.
(b) In May 1999, the Company issued 50,000 shares of convertible
preferred 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.
39
<PAGE>
(c) 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 $238,020.
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 October 31, 2000. A third individual
note issued on August 31, 1999 for $45,388.00 possesses a balloon
payment due on January 1, 2000, this payment was extended in
fiscal 2000 to December 31, 2000.
(d) During the course of the year to August 31, 1999, the
Company received funding from Toho Partners, LLC, by two notes,
totaling $60,000. Toho Partners is wholly owned by the Chief
Executive Officer of the Company, Nick Pirgousis. The funds were
advanced to assist the Company in the payment of its
administrative and operating expenses from time to time. The
advance of such funds are evidenced by two Promissory Notes. The
terms of the notes provide for interest to be assessed at an
annual rate of 8.25%. The first note issued by Toho Partners on
August 31, 1999 was for $20,000.00 and has a balloon payment due
on January 1, 2000, which was extended to December 31, 2000. The
second note issued by Toho Partners on August 31, 1999 was for
$40,000.00 and has a balloon payment due October 31, 2000.
INDEBTEDNESS OF MANAGEMENT:
(a) On November 1, 1998, the Company issued 1,680,000 shares of
restricted common stock, subject to Rule 144, to Toho Ventures
Ltd., in exchange for 200 shares of common stock of Zoops Soups,
Inc., representing 100% of the outstanding and issued stock in
the company; and 200 shares of common stock of Floridino's, Inc.,
representing 100% of the outstanding and issued stock in the
company. The two entities were combined to for Floridino's Inc.,
which became a wholly owned subsidiary of the Company. Toho
Ventures Ltd., is a company whose majority shareholder is Nick
Pirgousis, the Chief Executive Officer of Floridino's
International Holdings Inc.
(b) 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
40
<PAGE>
of real estate located at 1810 3rd Street, S.E., Winter Haven,
Florida, 300 Cypress Gardens Blvd, Winter Haven, Florida 33880,
3560 Cypress Gardens Road, Winter Haven, Florida 33884. For
additional consideration to Michael Floridino, the Company
assumed the liabilities and encumbrances on each of those
properties. The property provided by Michael Floridino was the
Fair Market Value in accordance with inquiries and appraisals
made by the Company through various real estate brokers in the
Winter Haven, Florida area. The total market value of the three
properties, not reduced by mortgages, liens and encumbrances, was
approximately $639,000.
(c) During the course of the year to August 31, 1999, the Company
received funding for reconstruction of the Company's operations
from Raffles Toho Inc., the total sum of approximately $238,020.
Raffles Toho is wholly owned by the Chairman of the Board of
Directors of the Company, Nick Pirgousis. The 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 October 31, 2000. A third individual
note issued on August 31, 1999 for $45,388.00 possesses a balloon
payment due on January 1, 2000.
(d) During the course of the year to August 31, 1999, the
Company received funding from Toho Partners, LLC, by two notes,
totaling $60,000. Toho Partners is wholly owned by the Chief
Executive Officer of the Company, Nick Pirgousis. The funds were
advanced to assist the Company in the payment of its
administrative and operating expenses from time to time. The
advance of such funds are evidenced by two Promissory Notes. The
terms of the notes provide for interest to be assessed at an
annual rate of 8.25%. The first note issued by Toho Partners on
August 31, 1999 was for $20,000.00 and has a balloon payment due
on January 1, 2000. The second note issued by Toho Partners on
August 31, 1999 was for $40,000.00 and has a balloon payment due
on October 31, 2000.
TRANSACTIONS WITH MANAGEMENT:
Floridino's International, Inc. and Floridino's Pizza Etc., Inc.
rent real property from a Floridino's International Holdings,
Inc.'s shareholder, and President, Michael Floridino during
fiscal years 1998 and 1997.
41
<PAGE>
There was no formal lease agreement between this shareholder and
the Company or its wholly owned subsidiaries. Total rent paid to
the shareholder during the years ended December 31, 1998, and
1997, approximated $26,000 and $32,000, respectively.
The transactions described were on terms that are at least as
favorable to the company as would be expected to be negotiated
with unaffiliated third parties and no preferences have been
given to any of the parties with whom the Company has transacted.
Item 8. DESCRIPTION OF SECURITIES
The Company is authorized under its certificate of incorporation
to issue 25,000,000 shares of $.001 par value common stock and
200,000 shares of convertible preferred stock, no par value. All
of the common shares are entitled to one vote on any matter
brought before the shareholders including the election of
directors. The preferred stock may be issued in series and the
board of directors is specifically vested with the authority to
establish and designate series of preferred and fix rights,
preferences, privileges and restrictions of any series of the
preferred stock, including without limitation, those relating to
any dividend rights and terms, conversion rights, voting rights,
redemption rights, liquidation preferences and sinking fund
terms. The preferred shares have no voting rights, are non-
preemptive and have no dividend provision. The preferred shares
are convertible into common stock. Each share of the preferred
is convertible into one share of common stock starting in May
2000.
The Board may out of funds legally available therefor, at any
regular or special meeting, declare dividends upon the capital
stock of the Corporation as and when it deems expedient. Before
declaring any dividend there may be set apart out of any funds of
the Corporation available for dividends, such sum or sums as the
Board from time to time in their discretion deem proper for
working capital or as a reserve fund to meet contingencies or for
equalizing dividends or for such other purposes as the Board
shall deem conducive to the interests of the Corporation.
42
PART II
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 Bulletin
Board under the symbol "FDNO". The following table sets forth,
for the periods indicated, the high and low sale prices for the
shares of common stock as reported by OTC:
High Low
------ -------
Fiscal Year Ended December 31, 1997:
Fourth Quarter ..................................$6.00 $5.00
Fiscal Year Ended December 31, 1998:
First Quarter....................................$5.50 $5.25
Second Quarter...................................$5.50 $4.00
Third Quarter....................................$5.75 $5.375
Fourth Quarter...................................$5.50 $5.00
Fiscal Year Ended December 31, 1999:
First Quarter....................................$6.0625 $5.00
Second Quarter...................................$6.125 $5.00
Third Quarter................................... $7.875 $5.625
Fourth Quarter...................................$8.875 $6.00
The source of the bid information provided in this section
are the quotations as provided by the NASDAQ. 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
3,469,700 are deemed "restricted securities" as that term is
43
<PAGE>
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.
Item 2. LEGAL PROCEEDINGS
There are no legal proceedings outside of the ordinary course of
business.
Item 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has recently changed its accountants and has 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.
Item 4. RECENT SALES OF UNREGISTERED SECURITIES
(a) On November 1, 1998, the Company issued 1,680,000 shares of
restricted common stock, subject to Rule 144, to Toho Ventures
Ltd., in exchange for 200 shares of common stock of Zoops Soups,
Inc., representing 100% of the outstanding and issued stock in
the company; and 200 shares of common stock of Floridino's, Inc.,
representing 100% of the outstanding and issued stock in the
company. The two entities were combined to form Floridino's
Inc., which became a wholly owned subsidiary of the Company. The
issuance of 1,680,000 shares to Toho Ventures was exempt from
registration under Section 4(2) of the Securities Act of 1933 as
it was a private offering of shares by the issuer to one
accredited sophisticated investor with no immediate distribution
by the purchaser. The estimated value of the consideration
received for the November 1998 issuance was approximately
$337,000.
44
<PAGE>
(b) On November 16, 1998, the Company issued 500,000 shares of
restricted common stock to Hynford Holdings Inc., a Bahamian
Corporation, towards the purchase of various production
machinery, auxiliary, plant and restaurant equipment owned by
Hynford Holdings. The issuance of 500,000 shares to Hynford
Holdings, Inc., was exempt from registration under Section 4(2)
of the Securities Act of 1933 as it was a private offering of
shares by the issuer to one accredited sophisticated investor
with no immediate distribution by the purchaser. The estimated
value of the consideration received for the November 1998
issuance was approximately $87,000.
(c) On May 23, 1999, the Company issued 50,000 shares of
preferred restricted common stock to Michael Floridino, in
connection with the purchase of three (3) parcels of real estate
located at 1810 3rd Street, S.E., Winter Haven, Florida, 300
Cypress Gardens Blvd, Winter Haven, Florida 33880, 3560 Cypress
Gardens Road, Winter Haven, Florida 33884. The preferred stock
is convertible into common stock at $5.00 per share commencing in
May 2000. For additional consideration to Michael Floridino, the
Company assumed the liabilities and encumbrances on each of those
properties and other liabilities associated with the Company's
business activities. The issuance of 50,000 shares of preferred
restricted common stock to Michael Floridino was exempt from
registration under Section 4(2) of the Securities Act of 1933 as
it was a private offering of shares by the issuer to one
accredited sophisticated investor with no immediate distribution
by the purchaser. The estimated value of the consideration
received for the May 1999 issuance was approximately $250,000.
(d) The Company in May 1999 conducted a private placement of
2,000,000 shares of common stock pursuant to Rule 505 of
Regulation D of the Securities Act of 1933. The total offering
price for the May 1999 offering was $1,000,000 and all the shares
offered by the Company, that being 2,000,000 shares, were sold.
The offering was made to accredited investors and as of June 30,
1999 was not fully completed. The offering was exempt from
registration as the securities were placed pursuant to the
exemption provided by Regulation D of the Securities Act of 1933.
The private placement of 2,000,000 shares of common stock was
exempt from registration pursuant to Rule 505 of Regulation D of
the Securities Act of 1933 as it was a private placement of
shares to accredited investors for a total aggregate value less
than $5 million.
(e) The Company in July 1997 conducted a private placement of
20,000 units with each unit consisting of 25 shares of common
45
<PAGE>
stock and 45 stock purchase warrants. The units were offered at
a price of $5.00 per unit and all units offered were fully
subscribed to raising the sum of $100,000 for the Company. The
strike price of the warrants for the July 1997 private placement
was $1.00 and the shares issued under the exercise of such
warrants were made to accredited investors. The offering was
exempt from registration as the securities were placed pursuant
to the exemption provided by Rule 504 of Regulation D of the
Securities Act of 1933. The private placement of 20,000 units
each consisting of 25 shares of common stock and 45 stock
purchase warrants was exempt from registration pursuant to Rule
504 of Regulation D of the Securities Act of 1933 as it was a
private placement of securities to accredited investors by a
company with a valid business plan which was for a total
aggregate value less than $1 million.
(f) In July 1997, the Company acquired all of the outstanding
stock in Floridino's Pizza Etc. Inc., Floridino's of Lake Wales,
Inc., Hard Ball Cafe, Inc., Floridino's Home of the Calzone,
Inc., and Floridino's International, Inc., and Floridino's of
Bartow, Inc., in a business combination accounted for as a
pooling of interests. The Company issued 1,800,000 shares of
stock having a $.001 par value per share to Michael Floridino in
exchange for his interest in those corporations. The transaction
was accounted for as a pooling and the equity of the acquired
companies at the time of the transaction was a deficit of
$98,796.
Subsequently during 1999, Michael Floridino sold approximately
650,000 shares of common stock to parties not affiliated with the
Company through private transactions. Mr. Floridino received
$32,500 fro this transaction. Another 150,300 shares were gifted
by Mr. Floridino to employees of the Company and family members.
The sale of these shares were exempt from registration pursuant
to Section 4(1) of the Securities Act of 1933.
(g) In December 1997, 18,000 shares of common stock were
purchased under the warrants sold in the October 1997 private
placement. The issuance of these shares was exempt from
registration pursuant to Rule 504 of Regulation D of the
Securities Act of 1933. The shares were issued for a total
aggregate value of $18,000.
(h) In December 1998, 261,000 shares of common stock were
purchased under the warrants sold in the October 1997 private
placement. The issuance of these shares was exempt from
registration pursuant to Rule 504 of Regulation D of the
46
<PAGE>
Securities Act of 1933. The shares were issued for a total
aggregate value of $261,000.
(i) During 1999, 558,000 shares of common stock were purchased
under the warrants sold in the October 1997 private placement.
The issuance of these shares was exempt from registration
pursuant to Rule 504 of Regulation D of the Securities Act of
1933. The shares were issued for a total aggregate value of
$346,500.
(j) Pursuant to its Consulting Agreement with the Ephraim Group,
and William Scott, the Company issued in August 1999, 100,000
shares and 40,000 shares of restricted common stock to these
consultants. The issuance of these shares were exempt from
registration pursuant to Section 4(2) of the Securities Act of
1933 as these shares were issued by the Company without any
public solicitation or offering and were accepted without any
intent to distribute. The total aggregate value of this issuance
is estimated at $90,000.
(k) In September and October 1999, the Company issued a
convertible promissory note with a face amount of $750,000.00 at
9.0% interest, with a maturity date of October 31, 2001, pursuant
to Regulation D 505 of the Securities Act of 1933. The note was
fully subscribed to by one accredited investor. Registration of
the sale of this security was exempt pursuant to Regulation D 505
of the Securities Act of 1933 as well as Section 4(2) as it was
conducted in a private placement to an accredited investor and
the aggregate amount raised was under $5 million.
Item 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Indemnification of the Directors and Officers of the Company is
authorized pursuant to the Company's Articles and By-laws and to
the fullest extent permitted by Florida law. It is possible that
the Company will be required to pay certain judgments, fines and
expenses incurred by an officer or director, including reasonable
attorneys' fees, as a result of actions or proceedings in which
such officers and directors are involved by reason of being or
having been an officer or director provided that said officer or
directors acted in good faith.
Under Florida Law, a corporation shall have power to indemnify
any person who was or is a party to any proceeding (other than an
action by, or in the right of, the corporation), by reason of the
fact that he or she is or was a director, officer, employee, or
47
<PAGE>
agent of the corporation or is or was serving at the request of
the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other
enterprise against liability incurred in connection with such
proceeding, including any appeal thereof, if he or she acted in
good faith and in a manner he or she reasonably believed to be
in, or not opposed to, the best interests of the corporation and,
with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The
termination of any proceeding by judgment, order, settlement, or
conviction or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably
believed to be in, or not opposed to, the best interests of the
corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
48
<PAGE>
PART F/S
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
To the Stockholders and Directors
Floridino's International Holdings, Inc.
We have audited the accompanying consolidated balance sheets of
Floridino's International Holdings, Inc. ("the Company") and its
subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' deficit and
cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Floridino's International Holdings, Inc.
and its subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for
the years then ended, in conformity with generally accepted
accounting principles.
As more fully discussed in Note 2 to the consolidated financial
statements, there are significant matters concerning the Company
that raise substantial doubt as to the ability of the Company to
continue as a going concern. Management's plans with regard to
these matters are also described in Note 2 to the consolidated
financial statements. The consolidated financial statements do
not include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the
event the Company cannot continue in existence.
Infante Lago & Company
North Miami, Florida
Dated: October 12, 1999
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998 AND 1997
<CAPTION>
<S> <C> <C>
ASSETS
Current Assets
Cash $15,502 -
Royalties receivable 11,826 12,250
Inventory 15,083 18,535
---------- ----------
Total Current Assets $42,411 $30,785
Property and Equipment
Equipment 345,266 222,874
Leasehold Improvements 323,077 57,811
Office and Other Equipment 56,925 55,694
---------- ----------
Total Property and Equipment $725,268 $336,379
Less: Accumulated Depreciation (213,246) (130,408)
---------- ----------
Property and Equipment 512,022 205,971
Other Assets
Organizational costs, net 6,859 13,671
Other Assets (security deposits) 79,906 18,191
---------- ----------
TOTAL ASSETS $641,198 $268,618
======== ========
LIABILITIES
Current Liabilities
Outstanding checks in excess of
Bank balance $ 19,903 $1,144
Accounts payable and accrued expenses 310,555 255,288
Accrued Payroll taxes and related
expenses 93,989 27,898
Deferred franchise fee revenue - 59,500
Loans payable - stockholder 152,799 21,071
Loans payable - supplier - 24,280
Current portion of obligations under
capital leases 6,490 -
Current portion of long term debt 313,728 89,872
---------- ----------
Total Current Liabilities $897,464 $479,053
Long term debt, net of current portion 71,584 326,459
Obligations under capital leases net
Of current portion 42,710 -
STOCKHOLDERS' DEFICIT
Common stock, par value $.001;
25,000,000 shares authorized,
4,959,000 shares issued and outstanding
at December 31, 1998 and 2,518,000
issued and outstanding at
December 31, 1997 $ 4,959 $2,518
Additional Paid in Capital 802,711 119,631
Accumulated Deficit (1,178,230) (659,043)
------------ ----------
Total Stockholders' Equity (370,560) (536,894)
------------ ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $641,198 $268,618
============= ==========
The accompanying notes are an integral part of these financial
statements.
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
</TABLE>
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
REVENUES
Food and Beverage Sales $1,577,564 $1,478,196
Franchise Fees 59,500 34,000
Royalty Fees 32,207 49,298
---------- ----------
Total Revenues 1,669,271 1,561,494
COSTS OF SALES:
Costs of goods sold 1,032,945 956,415
---------- ----------
Gross Profits 636,326 605,079
OPERATING EXPENSES:
General Administrative 996,232 807,046
Cost of restaurant closings 138,555 65,602
---------- ----------
Total Operating Expenses 1,134,787 872,648
OTHER INCOME (EXPENSES):
Equipment sales 0 23,468
Miscellaneous income 8,596 19,601
Interest expense (29,322) (31,842)
--------- ---------
LOSS FROM OPERATIONS BEFORE
PROVISION FOR INCOME TAXES (519,187) (256,342)
Provision for Income taxes - -
---------- ----------
NET LOSS $(519,187) $(256,342)
========== ==========
LOSS PER SHARE:
Basic:
Net loss per share (0.19) (0.10)
Weighted average shares
outstanding 2,698,974 2,518,000
=========== ===========
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Loss $(519,187) $(256,342)
Adjustments to Reconcile
Net Loss to Net Cash
Used in Operating
Activities:
Depreciation 84,402 30,645
Amortization 6,812 1,831
Stock issued for services 0 200
Changes in Assets and
Liabilities
Increase/(Decrease) In:
Royalties Receivable 424 4,652
Note Receivable - Shareholder - 37,715
Inventory 3,452 (205)
Other Assets (7,729) 4,551
Organizational Costs - (12,449)
Increase/(Decrease) In:
Accounts payable 45,048 48,784
Accrued payroll taxes and
related expenses 66,091 6,433
Deferred franchise fee
revenue (59,500) 10,500
---------- ----------
NET CASH USED IN
OPERATING ACTIVITIES (380,187) (123,685)
CASH FLOW FROM
INVESTING ACTIVITIES:
(Additions) disposals to
property & equipment 39,501 (40,391)
---------- ----------
NET CASH PROVIDED (USED) IN
INVESTING ACTIVITIES 39,501 (40,391)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from long-term debt - 81,885
Outstanding checks in excess
Of bank balance 18,759 (33,182)
Principal payment on
long-term debt (31,019) (37,978)
Issuance of common stock 261,000 118,000
Purchase of minority interest - (10,000)
Loans payable - stockholder 131,728 21,071
Loans payable - supplier (24,280) 24,280
---------- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 356,188 164,076
---------- ----------
NET INCREASE/(DECREASE) CASH 15,502 -
CASH AT BEGINNING OF YEAR - -
---------- ----------
CASH AT END OF YEAR $15,502 $ -
=========== ===========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest expense 29,322 43,007
Stock issued for purchase
of equipment 87,079 -
Stock issued for acquisition
of subsidiary 337,442 -
Equipment acquired through
Capital leases 49,200 -
---------- ----------
$503,043 $43,007
=========== ===========
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
Total Total
Number of Common Additional Accumulated Shareholders'
Shares Stock Paid in Cap Deficit Equity
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE
JANUARY 1, 1997 1,800,000 $1,800 $ 2,149 $(402,701) $(398,752)
Issuance of common
stock in private
placement 500,000 500 99,500 - 100,000
Issuance of common
stock in lieu of
payment for services 200,000 200 - - 200
Issuance of common
stock due to exercise
of warrants 18,000 18 17,982 - 18,000
Net Loss - - - (256,342) (256,342)
----------------------------------------------------------------
BALANCE
DECEMBER 31, 1997 2,518,000 2,518 119,631 (659,043) (536,894)
================================================================
BALANCE
JANUARY 1, 1998 2,518,000 2,518 119,631 (659,043) (536,894)
Issuance of common
stock in connection
with acquisition of
subsidiaries 1,680,000 1,680 335,762 - 337,442
Issuance of common
stock for the purchase
of equipment 500,000 500 86,579 - 87,079
Issuance of common
stock in connection
with exercise of
warrants 261,000 261 260,739 - 261,000
Net Loss - - - (519,187) (519,187)
----------------------------------------------------------------
BALANCE
DECEMBER 31, 1998 4,959,000 4,959 802,711 (1,178,230) (370,560)
================================================================
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998 AND DECEMBER 31, 1997
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Floridino's International Holdings, Inc., the "Company", was
incorporated on June 25, 1997, in the State of Florida to
develop, own, operate and franchise family style neighborhood
Italian restaurants.
During July of 1997, the Company acquired all of the outstanding
stock in Floridino's Pizza Etc. Inc., Floridino's of Lake Wales,
Inc., Hard Ball Cafe, Inc., Floridino's Home of the Calzone,
Inc., and Floridino's International, Inc., and Floridino's of
Bartow, Inc., in a business combination accounted for as a
pooling of interests. The Company issued 1,800,000 shares of
stock having a $.001 par value per share to Michael Floridino in
exchange for his interest in those corporations, under an
exchange intended to qualify as a tax free exchange under Section
368 of the Internal Revenue Code. The acquired companies are
primarily engaged in restaurant and restaurant franchising
operations. The accompanying financial statements for the year
ended December 31, 1997 are based on the assumption that the
companies were combined for the full year, and financial
statements of the prior year have been restated to give effect of
the combination.
Details of the results of operations of the individual companies
for the period before the combination that are included in the
consolidated statements of operations and accumulated deficit are
as follows:
Six months ended
June 30, 1997
Revenue Net Loss
Floridino's Pizza Etc., Inc. $214,922 $ (4,223)
Floridino's of Lake Wales, Inc. 128,172 (42,610)
Hard Ball Cafe, Inc. 253,433 (27,022)
Floridino's Home of the Calzone, Inc. 234,979 599
Floridino's International, Inc. 89,649 (14,472)
Floridino's of Bartow, Inc. 144,264 (57,723)
-----------------------
$1,065,419 $(145,451)
=======================
59
<PAGE>
Floridino's of Lakeland, Inc. ("Lakeland") was incorporated in
September 1997, in the State of Florida to own and operate
restaurants. In November 1997, Lakeland acquired the assets and
assumed the liabilities of Floridino's of Lake Wales Inc.'s
restaurant operation, and opened a new restaurant. The Company
owns 100% of the outstanding shares of common stock in Lakeland.
On November 1, 1999 1998, the Company acquired all of the
outstanding stock of Floridino's of New York, Inc. and Zoop
Soups, Inc. for 1,680,000 shares of common stock. The
acquisition described above was accounted for by the purchase
method of accounting for business combinations. Accordingly, the
accompanying consolidated statements of operations do not include
any revenues or expenses related to these acquisitions prior to
the respective closing dates. No goodwill was recognized due to
management's inability to determine the future benefits to be
derived and assets and liabilities of the acquired company
approximated market value at the time of acquisition. The
accompanying consolidated financial statements for the year ended
December 31,1998, include the earnings/(deficits) for these
companies as of the date of acquisition.
The allocation of the purchase price to the companies is as
follows:
Zoops Floridinos NY Total
Fixed assets $192,292 $101,384 $293,676
Other assets 7,300 46,686 53,986
Trademarks 0 0 0
Less liabilities 0 (10,220) (10,220)
--------- -------- --------
Total price $199,592 $137,850 $337,442
On July 13, 1998, Floridino's Specialties, Inc. ("Specialties")
was formed. Specialties is a development stage company primarily
engaged in the manufacturing and marketing of frozen foods.
CONSOLIDATION POLICY
The accompanying consolidated financial statements include the
accounts of the Company and all of its wholly owned subsidiaries.
All significant intercompany balances and transactions have been
eliminated.
REVENUE AND COST RECOGNITION
The Company recognizes revenue from food and beverage sales as
the service is provided. Revenue from franchise sales is
recognized, net of allowance for uncollectible amounts, when
60
<PAGE>
substantially all significant services to be provided by the
Company have been performed. Expenditures are recorded on the
accrual basis whereby expenses are recorded when incurred, rather
than when paid.
USE OF ESTIMATES
The preparation of the financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. Estimates
also affect the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those
estimates.
INVENTORY
Inventory is stated at the lower of cost (first-in, first-out
method) or market and primarily consists of food products.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost. Depreciation is
computed by the straight-line method over the estimated useful
lives of the respective assets that range from five to ten years.
Expenditures for maintenance and repairs are charged to expense
as incurred; major replacements and improvements are capitalized.
When items of property or equipment are sold or retired, the
related cost and accumulated depreciation are removed from the
accounts and any gain or loss is included in income.
INCOME TAXES
The Company accounts for income taxes under the accrual method,
which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based
on the difference between the financial statements and tax bases
of assets and liabilities using enacted tax rates for the year in
which the differences are expected to reverse.
The significant component of the net deferred tax asset at
December 31, 1998, consists of the net operating loss
carry-forward that can be utilized to offset future taxable
income. Management believes that, based on earnings through and
subsequent to December 31, 1998, it cannot determine at this time
whether a deferred tax asset can be realized in the near future.
Therefore, a deferred tax asset has not been reflected in the
accompanying financial statements as of December 31, 1998. As of
61
<PAGE>
December 31, 1998, the Company has net operating loss carry
forwards for federal income tax purposes. At this time,
management is unable to determine the amount of net operating
loss carry forwards available to offset future profits.
At December 31, the Company had tax loss carry-forwards of
$803,430 which expire in 2012 and 2013. No portion of net
operating loss carry-forwards have been recognized and
accordingly have not been allocated to intangible assets. The
following represents between tax and book entries:
Provision for income taxes is comprised of the following for the
years ended December 31:
1998 1997
Current tax expense:
Federal $0 $0
State 0 0
----- ----
Provision for income taxes $0 $0
===== ====
A reconciliation of income tax expense at the statutory rate to
income tax expense at the Company's effective tax rate is as
follows:
Statutory U.S. Federal rate 34% 34%
Loss from operations (34%) (34%)
----- ----
Effective tax rate 0% 0%
===== ====
Deferred tax benefit $181,963 $91,203
Adjustment to bring
To net realizable value (181,963) (91,203)
Net realizable value $0 $0
========== ========
The statutory corporate tax rate of 34% was used to calculate
deferred tax benefits.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value for financial instruments under SFAS NO.
107, Disclosures about Fair Value of Financial Instruments, are
62
<PAGE>
determined at discrete points in time based on relevant market
information. These estimates involve uncertainties and cannot be
determined with precision. The estimated fair value of the
Company's financial instruments, which include cash, accounts
receivable and long-term debt approximates the carrying value in
the consolidated financial statements.
ORGANIZATION COSTS
Organizational costs consist of costs incurred during the
formation of the Company. These costs are being amortized over
sixty months.
ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities",
was issued in June 1998 and is effective for fiscal quarters
beginning after June 15, 1999. This statement establishes
accounting and reporting standards for derivative instruments and
for hedging activities and requires that entities recognize
derivative instruments as either assets or liabilities in the
statement of financial position and measure these instruments at
fair value. Management has concluded that the adoptions of SFAS
No. 133 will not have a material impact on the financial position
of the Company or its results of operations.
RECLASSIFICATIONS
Certain assets in the 1997 financial statements have been
reclassified to conform to the 1998 financials statement
presentation.
NOTE 2. SUMMARY OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
GOING CONCERN CONSIDERATIONS
The accompanying consolidated financial statements have been
presented in accordance with generally accepted accounting
principles, which assume the continuity of the Company as a going
concern. However, during the years ended December 31, 1998 and
1997, the Company experienced, and continues to experience,
certain going concern and liquidity problems. The Company has
incurred net losses of $519,187 and $256,343 for the years ended
December 31, 1998 and 1997. The Company's consolidated financial
position reflects a working capital deficiency of $855,053 at
December 31, 1998. These conditions raise substantial doubt as to
the ability of the Company to continue as a going concern.
Management's plans with regard to this matter encompass the
following actions:
63
<PAGE>
The Company plans to raise equity funds from private placements
of its common stock.
From the proceeds of these anticipated offerings, the Company
plans to pay outstanding liabilities, continue to explore selling
franchises, develop divisions for their restaurant operations,
and expand the frozen food division.
The eventual outcome of the success of management's plans cannot
be ascertained with any degree of certainty. The accompanying
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
LITIGATION
The Company and its subsidiaries are defendants in various
lawsuits filed by numerous suppliers for services rendered. The
Company has accrued the amounts of the proposed settlements in
the accompanying consolidated financial statements, as well as
the amounts of potential outstanding claims disclosed by the
Company's outside legal counsel.
FRANCHISE OPERATIONS
The following is a description of the most significant risks
facing a franchiser and how the Company mitigates those risks:
Legal/Regulatory Risk - the risk that changes in the regulatory
environment in which the franchiser operates creates additional
expenses not anticipated by the franchiser in pricing its
products. That is, regulatory initiatives designed to regulate
franchiser's disclosures to its franchisee. The Company mitigates
this risk by monitoring proposed regulatory legislation and by
assessing the impact of new laws.
Credit Risk - the risk that a franchise will default on fees owed
to the Company. The Company minimizes this risk by adhering to a
conservative selection process of franchises and by maintaining
sound franchise agreements with each franchisee, and by providing
for any amounts deemed uncollectible.
Interest Rate Risk - the risk that interest rates will change and
cause a decrease in the value of a franchiser's investment. To
the extent that liabilities come due more quickly than assets
mature, a franchiser might have to sell assets prior to maturity
and potentially recognize a gain or a loss. The Company mitigates
this risk by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities.
64
<PAGE>
NOTE 3. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1998 and
1997:
1988 1997
HARDBALL CAFE INC.
Note payable, Colonial Bank, payable in
monthly installments of 1.5% of the outstanding
balance, including interest at a fixed annual
rate of 9.25%. In 1997, the loan was secured
by personal assets owned by a stockholder of
the Company. The loan was refinanced in 1998. $ - $21,427
Note payable, First Union Bank, payable in
monthly installments of $500, including interest
at the prime rate as published by the Wall Street
Journal, plus 2%. The loan is secured by
restaurant equipment and has a balloon payment of
approximately $37,000, plus interest, due on
November 20, 1999. 42,259 42,356
Note payable, First Union Bank, payable in
monthly installments of $40, including interest
at a fixed annual rate of 12%. The loan is
unsecured. 2,300 2,556
FLORIDINO'S OF LAKE WALES, INC.
Note payable, First Union Bank, payable in
monthly installments of $350, including interest
at the prime rate as published by the Wall Street
Journal, plus 2%. The loan is unsecured and has a
balloon payment of approximately $17,400, plus
interest, due on February 2, 2000. 20,476 21,570
Note payable, Colonial Bank, payable in monthly
installments of $775, including interest at the
prime rate as published by the Wall Street
Journal, plus 2%. The loan is secured by
restaurant equipment and was due in full on
December 23, 1997. The Company retired the debt
in 1999. 46,241 38,650
Note payable, payable in monthly installments
of $475, including interest at a fixed annual
rate of 8% - 5,410
65
FLORIDINO'S INTERNATIONAL INC.
Note payable, Colonial Bank, payable in monthly
installments of $522, including interest at a
fixed annual rate of 11.25%. The loan is secured
by equipment and has a balloon payment of
approximately $24,100, plus interest, due on
June 8, 2000. 33,987 36,172
Note payable, First Union Bank, payable in
monthly installments of $166, including interest
at the prime rate as published by the Wall Street
Journal, plus 2%. The loan was retired in 1988. - 885
Note payable, Lanier, payable in monthly
installments of $128, including interest at a
fixed annual rate of $4. The loan was retired
in 1998. - 323
Note payable, Honkamp Krueger & Co., P.C., payable
in monthly installments of $541, including interest
at a fixed annual rate of 9%. The loan is secured
by property owned personally by a stockholder of
the company, and has a balloon payment of
approximately $48,800, plus interest due on
May 21, 2000. 51,060 52,215
Note payable, Honkamp Krueger & Co., P.C., payable
in monthly installments of $177, including interest
at a fixed annual rate of 9%. The loan is secured
by property owned personally by a stockholder of
the company, and has a balloon payment of
approximately $11,100, plus interest due on
October 10, 2000. 13,190 13,855
Note payable, David Mills, payable in monthly
installments of $200. The loan is non-interest
bearing. The loan was retired in 1998. - 2,100
FLORIDINO'S OF BARTOW, INC.
Note payable, Colonial Bank, payable in monthly
principal installments of $655, plus interest at
the prime rate as published by the Wall Street
Journal, plus 2%. The loan is secured by
66
<PAGE>
restaurant equipment and has a balloon payment
of approximately $33,000 plus interest, due on
July 23, 1999. 38,359 48,577
Note payable, Citrus & Chemical Bank, payable in
monthly installments of $184, including interest
at a fixed annual rate of 9.5%. The loan is
secured by equipment and is due in full on
March 29, 1998. 752 752
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
Note payable, former shareholder, payable in
monthly installments of $500, including interest
at a fixed annual rate of 8%. The loan is due in
August 1999. 3,591 9,063
Note payable, vendor, payable in monthly
installments of $1,500, including interest at
a fixed annual rate of 13%. The loan is
unsecured. 9,884 -
Note payable, individual, payable on demand.
Interest is payable monthly at a fixed annual
rate of 8%. The loan is unsecured. 16,510 -
FLORIDINO'S PIZZA ETC., INC.
Note payable, Colonial Bank, payable in monthly
installments of $212, including interest at a
fixed annual rate of 9.75%. The loan is secured
by a second mortgage on property owned by a
stockholder of the company and is due in full
on February 28, 2001. 5,133 7,070
Note payable, First Union Bank, payable in
monthly installments of $500, including interest
at the prime rate as published by the Wall
Street Journal, plus 2%. The loan is secured by
a second mortgage on property owned by a
stockholder of the Company and has a balloon
payment of approximately $37,000, plus interest,
due on November 20, 1998. 43,161 43,909
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<PAGE>
Note payable, First Union Bank, payable in
monthly installments of $231, including interest
at the prime rate as published by the Wall
Street Journal, plus 2%. The loan is secured by
vehicles and is due in full on March 3, 2000. 5,133 6,945
Note payable, First Union Bank, payable in
monthly installments of $332, including interest
at the prime rate as published by the Wall
Street Journal, plus 2%. The loan is secured
by personal property owned by a stockholder of
the Company and is due in full on December 20,
2000. 7,705 10,290
Note payable, Ledwig, payable in monthly
installments of $529, including interest at a
fixed annual rate of 10%. The loan is secured
by restaurant equipment and is due in full in
October 1999. 5,535 10,602
Note payable, First Union Bank, payable in
monthly installments of $500, including interest
at the prime rate as published by the Wall Street
journal, plus 2%. The loan is secured by
restaurant equipment and a vehicle owned by a
stockholder of the company, and has a balloon
payment of approximately $36,000, plus interest,
due on November 20, 1998. 40,036 41,604
----------------
385,312 416,331
Less: Current Maturities 313,728 89,872
----------------
Long Term Debt 71,584 326,459
================
There are no sinking fund requirements regarding long term debt.
The following represents the maturities schedule for long term
debt at December 31, 1998:
2000 $42,196
2001 16,167
2002 8,133
2003 5,088
------
Total $71,584
=======
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<PAGE>
NOTE 4. LEASE OBLIGATIONS
The Company leases certain restaurant and office space, and
certain equipment, under operating leases. Most of the Company's
operating leases are for a period of three or five years with
renewal options.
At December 31, 1998, total future minimum lease payments under
operating leases are as follows:
Year ended December 31,
1999 $126,721
2000 45,894
----------
Total future minimum lease payments $172,615
The Company is the lessee of certain computer equipment under
capital leases expiring in 2003. The assets and liabilities
under capital leases are recorded at the lower of the present
value of the minimum lease payments or the fair value of the
asset. The assets are amortized over the lower of their related
lease terms or their estimated productive lives. There was no
amortization of assets under capital leases for 1998 and 1997.
Computer equipment held under capital leases was $49,200 and $0
for 1998 and 1997, respectively.
Minimum future lease payments, under capital leases as of
December 31, 1998, for each of the next five years and in the
aggregate are:
Year ended December 31,
1999 $ 15,900
2000 15,900
2001 15,900
2002 15,900
2003 15,900
Thereafter -
------------
79,500
Less: Amount representing interest (30,300)
------------
Present value of net minimum lease payment 49,200
Less: Current portion (6,490)
------------
Obligations under capital leases net
Of current portion $ 42,710
============
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<PAGE>
Interest rates on capitalized leases vary from 19% to 21% imputed
based on the lower the of Company's incremental borrowing rate at
the inception of each lease or the lessor's implicit rate of
return.
Capitalized leases are amortized over the life of the assets or
the term of the lease, whichever is less. The amortization
periods range from three to seven years.
NOTE 5. FRANCHISE AGREEMENTS
Under the provisions of the franchise sales agreements, the
Company agrees to provide services to assist the franchise in
setting up and operating a restaurant. The service provided
includes assistance in site selection, training personnel,
implementation of an accounting system, design of quality control
programs, and operating assistance.
During the year ended December 31, 1997, Floridino's
International, Inc. sold five franchises. There were eight
franchise outlets in operation as of December 31, 1998 and nine
as of December 31, 1997.
The Company defers recognition of franchise fee revenue until
they have fulfilled all of their required services stipulated in
the franchise agreements. There were no amounts recorded for
deferred revenue from franchised outlets at December 31, 1998,
and $59,500 recorded at December 31, 1997.
NOTE 6. RELATED PARTY TRANSACTIONS
Floridino's International, Inc. and Floridino's Pizza Etc., Inc.
rent real property from a Floridino's International Holdings,
Inc.'s shareholder, and President, Michael Floridino. There is
no formal lease agreement between this shareholder and the
Company or its wholly owned subsidiaries, Floridino's
International, Inc. and Floridino's Pizza Etc., Inc. Total rent
paid to the shareholder during the years ended December 31, 1998,
and 1997, approximated $26,000 and $32,000, respectively.
On November 1, 1998, the Company issued 1,680,000 shares of
restricted common stock, subject to Rule 144, to Toho Ventures
Ltd., in exchange for 100% of the outstanding stock of Zoops
Soups Inc. and Floridino's Inc.. This consummated an acquisition
70
<PAGE>
of the two entities which became wholly owned subsidiaries of the
Company. Toho Ventures Ltd. Is a company whose majority
shareholder, Nick Pirgousis, is the Chairman of the Board of the
Company and its majority shareholder.
At December 31, 1998, short-term loans payable to officer
consisted of non-interest bearing loan maturing in May 1999.
Interest was not recorded on this transaction due to the fact
that the nature of the loan was of such a short term (six months)
and the applicable rate to be applied (approximately 8%) would
have produced an immaterial amount.
NOTE 7. COMMON STOCK AND WARRANTS
PRIVATE OFFERING
During July of 1997, the Company initiated a private offering.
The offering consisted of 20,000 Units, each Unit consisting of
25 shares of common stock, and 45 redeemable common stock
purchase warrants, at a price of $5.00 per Unit. Each stock
purchase warrant included in the Units is exercisable into one
share of the Company's common stock at a price of $1.00 per share
during the nine month period after the closing of the offering.
These warrants were extended until December 6, 1998.
Accordingly, the Company issued 500,000 shares of common stock
and 900,000 warrants as a result of the private offering. The
Company issued an additional 200,000 restricted shares of common
stock in lieu of payment for services rendered in connection with
the private offering. The common stock and warrants constituting
a Unit may be separately transferred at any time after issuance.
In December 1997, 18,000 shares of common stock were purchased
under the warrants.
In 1998, the Board voted to extend the warrants through March of
1999. In 1998, 261,000 warrants were exercised at $1.00 per
share.
RESTRICTED STOCK
Until such time as a public market exists for the common stock of
the Company, the shares owned by insiders, officers and directors
totaling 3,469,700 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
71
<PAGE>
year may sell every three months an amount equal to the greater
of (a) one percent of the Company's issued and outstanding common
stock or (b) the average weekly trading volume of the common
stock during the four calendar weeks prior to such sale.
NOTE 8. SUBSEQUENT EVENTS
RESTAURANTS
During 1999, in order to streamline operations, all unprofitable
restaurants existing in 1998 were closed. The only restaurant
remaining in Florida is the North Lakeland operation. The North
Lakeland store is being renovated and will be fully operational
by the end of October 1999. This store will be a full service
restaurant.
The Floridino's New York and Zoop Soups operation have been
merged into one restaurant. The new restaurant, located at
Broadway and 23rd Street, in Manhattan, New York, will serve as
the test store for the Company's new urban concept. The 23rd
Street location has been opened since September 1, 1999.
The Company is opening two express concept restaurants in Lake
Wales and Delray, Florida. The "Floridino's Fast Italian"
concept restaurants are under construction and are targeted to
open on December 1, 1999.
FROZEN FOOD DIVISION
During 1999, Floridino's Specialties Distribution, Inc., the
frozen foods division, expanded and renovated its manufacturing
facility. The division has secured USDA approval to commence
production. It is anticipated that the plant will begin to
fulfill orders in November of 1999. The division will private
label product for restaurant chains and will sell its own brand
through food brokers and super markets.
COMMON STOCK AND WARRANTS
During 1999, the remaining warrants issued under the July 1997
private placement were exercised. In total, 837,000 of the
original warrants have been exercised. The remaining 63,000
original warrants have lapsed. The exercise price of $1.00 per
share was paid for the issuance of 135,000 shares of common
stock. An additional 423,000 shares were issued at $0.50 per
share.
72
<PAGE>
In May of 1999, the Company raised $1,000,000 in capital through
a Regulation D 505 private placement offering. Two million
shares of common stock were sold at $0.50 per share.
Additional shares of stock, totaling 140,000, were issued to
individuals in partial payment for services rendered and/or to be
rendered, during 1999.
FRANCHISE OPERATIONS
The Company is in the process of updating its Uniform Franchise
Offering Circular (UFOC). The Company plans to market several
new franchise concepts to potential franchisees in the second
quarter of 2000.
DEBT REDUCTION
A substantial portion of the capital raised through private
placement offerings has been utilized to restructure and reduce
the Company's long-term debt. All of the loans payable to
Colonial Bank have been satisfied in 1999. Currently, all
obligations to First Union Bank are being negotiated. It is the
opinion of outside counsel, that the obligations to First Union
will be satisfied for approximately 50% of the principal amounts
owing. The accompanying financial statements do not include the
effects of this uncertainty.
NOTE 9. YEAR 2000 READINESS STATEMENT (UNAUDITED)
The Company is actively addressing the issues related to the date
change in year 2000. This is necessary because many computer
systems were programmed using only two digits to contain the year
in the date fields. On January 1, 2000, many of these programs
will fail to perform date calculations correctly and produce
erroneous results. This could temporarily prevent the Company
from processing business transactions. The Company began efforts
to address this issue.
Currently, all computer systems including both IT and non-IT
systems and work is underway to remedy those systems deemed to be
year 2000 non-compliant. The non-IT systems are primarily
systems with embedded processors such as telephones and security
systems. The remediation of the IT and non-IT systems is
expected to be completed by the end of 1999. The Company has
obtained letters of certification from its mission critical
computer systems and software vendors.
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<PAGE>
The costs associated with the remediation efforts have been
internally generated. Any external costs, projected to be
incurred, to achieve compliance will be funded from the Company's
existing working capital and are not expected to be material in
nature.
There are significant risks associated with the year 2000 issues.
Many of these risks such as those associated with electrical
power or telecommunications are outside the reasonable control of
the Company. Although the Company believes its remediation and
contingency planning efforts adequately identify and address the
year 2000 issues that are within the Company's reasonable
control, there can be no assurance that the Company's efforts
will be fully effective. Due to the significant risks, the
Company's management is monitoring these efforts very closely.
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(As restated)
<TABLE>
<CAPTION>
<S> <C> <C>
9/30/99 12/31/98
ASSETS
Current Assets
Cash $187,480 $15,502
Investment in marketable securities 259,429 0
Royalties receivable 16,304 11,826
Inventory 12,535 15,083
---------- ----------
Total Current Assets $475,748 $42,411
Property and Equipment:
Equipment 1,403,748 402,191
Leasehold Improvements 735,116 323,077
Less accumulated Depreciation (348,691) (213,246)
Land 320,000 0
Organization costs (net of
amortization) 3,215 6,859
Other Assets (security deposits) 74,814 79,906
---------- ----------
TOTAL ASSETS $2,663,950 $641,198
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Bank overdrafts $ 0 $19,903
Accounts payable and accrued expenses 380,113 310,555
Accrued Payroll and related expenses 10,931 93,989
Loans payable - stockholder 0 152,799
Current portion of lease obligations 93,917 6,490
Current portion of long term debt 268,920 313,728
---------- ----------
Total Current Liabilities $ 753,881 $897,464
Long term debt:
Lease Obligations 139,498 42,710
Long term notes and mortgages 606,374 71,584
Convertible Debentures payable(net) 166,666 0
STOCKHOLDERS' EQUITY
Common stock, par value $.001;
25,000,000 shares authorized,
7,657,000 shares issued and outstanding
at September 30, 1999 and
4,959,000 at December 31, 1998 $ 7,657 $4,959
Preferred stock, 50,000 shares issued
and outstanding, convertible to 50,000
shares of common stock at $5 per share,
no par, no dividend, non-cumulative 250,000 0
Additional Paid in Capital 2,569,847 802,711
Accumulated Deficit (1,829,973) (1,178,230)
------------ ----------
Total Stockholders' Equity 997,531 (370,560)
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,663,950 $641,198
========== ========
The accompanying notes are an integral part of these financial
statements.
</TABLE>
75
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
NINE MONTHS ENDING SEPTEMBER 30,1999 & 1998
(As restated)
<TABLE>
1999 1998
------ ------
<S> <C> <C>
REVENUES
Food/Beverage Sales $ 819,022 $1,277,397
Franchise Fees 24,122 59,500
Royalty Fees 28,943 27,154
---------- -----------
Total Revenues 872,087 1,364,051
Costs of goods sold (540,243) (819,128)
---------- ----------
Gross Profits 331,844 544,923
OPERATING EXPENSES:
Selling, general
and administrative (1,165,235) (1,026,926)
Depreciation
and amortization (26,089) (22,203)
---------- ----------
Loss from continuing
Operations (859,480) (504,206)
OTHER INCOME(EXPENSE):
Unrealized gain on
short term invest. 160,929 0
Interest Expense (16,826) (11,926)
---------- ----------
Net loss before
Extraordinary item and
Income tax provision (715,377) (516,132)
EXTRAORDINARY ITEM:
Gain or early
extinguishment of debt 96,415 0
Less tax effect (32,781) 0
-------- --------
Loss before provision
For income taxes (651,743) (516,132)
Provision for Income taxes 0 0
---------- ----------
NET LOSS $(651,743) $(516,132)
========== ==========
NET LOSS PER SHARE:
Basic:
Loss from
continuing operations $ (.12) $(0.20)
Gain from
extraordinary items 0.01 0.00
Net loss per share (.11) (0.20)
Weighted average shares
outstanding 5,799,974 2,618,000
=========== ==========
The accompanying notes are an integral part of these financial
statements.
</TABLE>
77
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDING SEPTEMBER 30TH
(As restated)
<TABLE>
<CAPTION>
September 30
1999 1998
----------------------------
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Loss $ (651,743) $(516,132)
Adjustments to Reconcile Net
Income Items not requiring the
Use of Cash:
Depreciation and amortization 139,089 72,203
Compensation expense paid by
Issuing Common Stock 90,000 0
Unrealized gain on Short
Term investment (160,929) 0
Changes in Other Assets and
Liabilities:
Royalties Receivable (4,478) 7,595
Inventory 2,548 18,536
Short Term Investments ( 98,500) 0
Other Assets 5,093 (7,409)
Deferred franchise fee revenue 0 (59,500)
Accounts payable and accrued exp. 69,557 5,850
Accrued payroll and related exp. (83,059) 38,033
------------ ------------
Net cash provided by (used by)
Operations (692,422) (440,824)
CASH FLOW FROM
INVESTING ACTIVITIES:
Purchase of land (320,000) 0
Purchase and acquisition of property
And equipment (55,153) (26,174)
------------ ------------
Net Cash provided by (used by)
Investing Activities (375,153) (26,174)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of convertible
Debentures 500,000 0
Increase (decrease) in loans payable
To stockholders (152,799) 44,861
Payment of Bank Overdrafts (19,903) (1,144)
Increase of common stock upon exercise
of warrants 346,500 200,000
Issuance of common stock through
Secondary offering 1,000,000 0
Payment of short term debt (184,713) (329,364)
Long Term Debt (pay) receive (249,532) 572,191
------------ ------------
Net Cash Provided by (Used By)
Investing Activities 1,239,553 486,544
NET INCREASE/(DECREASE) CASH 171,978 19,546
CASH AT BEGINNING OF YEAR 15,502 0
------------ ------------
CASH AT END OF THE PERIOD $ 187,480 $19,546
============ ============
SUPPLEMENTAL DISCLOSURES:
Interest paid during the period $ 14,951 $11,926
Income taxes paid during the period 0 0
The accompanying notes are an integral part of these financial
statements.
</TABLE>
79
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM DECEMBER 31, 1998 THROUGH SEPTEMBER 30, 1999
(as restated)
Common Paid in Retained
Shares Amount Preferred Capital Deficit
Bal 12/31/98 4,959,000 $4,959 $0 $802,711 ($1,178,230)
Issuance of
Stock upon
Exercise of
Warrants 558,000 558 345,942
Issuance of
Stock for
Compensation 140,000 140 89,860
Issuance of
Common Stock 2,000,000 2,000 998,000
Issuance of
Preferred stock 250,000
Beneficial conversion
Feature of debentures 333,334
Net loss (651,743)
---------- ------ -------- ------- ---------
Bal. 9/30/99 7,657,000 $7,657 $250,000 $2,569,847 $(1,829,973)
========= ====== ======== ========= ==========
Total stockholders' equity is $997,531.
The accompanying notes are an integral part of these financial
statements.
80
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDING SEPTEMBER 30, 1999
Note 1 - Nature of Operations
Floridino's International Holdings, Inc. (the Company) was
incorporated on June 25, 1997 in the State of Florida to
develop, own, operate, and franchise family style Italian
restaurants. The consolidated statements of the Company include
the following subsidiary companies:
Floridino's Pizza Etc., Inc.- a restaurant located in
Winterhaven, Florida that was closed in September 1999.
Hard Ball Cafe, Inc.- a restaurant located in Winterhaven,
Florida that was closed in April 1999.
Floridino's Home of the Calzone, Inc.- a restaurant located in
Lakeland, Florida that was closed in May 1999.
Floridino's International, Inc.- a restaurant franchiser
located in Winterhaven, Florida.
Floridino's of Bartow, Inc.- a restaurant located in Bartow,
Florida that was closed in December 1998.
Floridino's Specialties Distributions, Inc.- a food
manufacturing plant located in Lakeland, Florida.
Floridino's Express, Inc.- a restaurant incorporated in 1999
located in Lake Wales, Florida.
Toho Holdings, Inc.- a company incorporated in 1999 to hold
title to the real estate and lease agreements of the consolidated
companies.
Floridino's, Inc.- a restaurant located in New York, New York,
formerly Zoop Soups Inc. This restaurant was reopened in 1999
after a period of reconstruction.
Floridino's of Lakeland, Inc. - a restaurant located in Lake
Wales, Florida incorporated in September 1997. This restaurant
was closed in late 1998 and reopened after construction in 1999.
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<PAGE>
Note 2- Summary of Significant Accounting Policies
Consolidation- The accompanying consolidated financial
statements include the accounts of the company and all of its
wholly owned subsidiaries. All significant inter-company
balances have been eliminated.
Revenue and Cost Recognition- The Company recognizes revenue
from food and beverage sales as the service is provided. Revenue
from franchise sales is recognized, net of allowance of
uncollectible amounts, when substantially all significant
services provided by the Company have been performed.
Expenditures are recorded on the accrual basis whereby expenses
are recorded when incurred, rather than when paid.
Sales of frozen foods are recorded when the goods are delivered.
Cost of sales of frozen foods are recorded using the absorption
cost method and are recorded at the time when the corresponding
goods have been recorded as sold.
Use of Estimates- The preparation of the financial statements
in conformity with generally accepted accounting principles
requires management to make reasonable estimates and assumptions
that affect the reported amounts of the assets and liabilities
and disclosure of contingent assets and liabilities and the
reported amounts of revenues and expenses at the date of the
financial statements and for the period they include. Actual
results may differ from these estimates.
Investment in Marketable Securities- Investment in marketable
securities represents the purchase of shares of a NASDAQ listed
stock valued at the market at September 30, 1999. The unrealized
gain on this investment is recorded in "Other Income" in the
statement of operations. 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
September 30, 1999.
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
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<PAGE>
asset. Improvements made to leased property are depreciated on a
straight-line basis over the estimated useful life of the
improvement or the period of the lease remaining, whichever is
less.
Expenditures for major repairs and renewals that extend the
useful life of the asset are capitalized. Minor repair
expenditures are charged to expense as incurred.
Income Taxes- The Company accounts for income taxes under the
accrual method established by Statement of Financial Accounting
Standards No. 109, which requires recognition of deferred tax
assets and liabilities for the expected futures tax consequences
and events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the
financial statements and tax bases of assets and liabilities
using enacted rates for the year in which the differences are
expected to reverse.
Management believes that based upon earnings through September
30, 1999, the realization of a tax-deferred asset through future
earning offsets of current losses cannot be determined.
Therefore, a deferred asset has not been reflected in the
accompanying financial statements as of September 30, 1999.
Extraordinary items- During the nine months ending September
30, 1999, the Company extinguished certain long term debt. The
difference between the carrying value of this debt and the
settlement amount of the debt at the date of extinguishment is
recognized as an extraordinary item in the consolidated statement
of operations as a "gain on early extinguishment of debt".
Fair Values of Financial Instruments- The carrying amounts of
all cash, accounts receivables, short term investments,
inventories, accounts payable, and other obligations reported in
the statement of financial position are estimated by management
to approximate fair value.
Organization Costs - Organization costs consist of costs
that were incurred during the formation of the Company and are
being amortized of a period of sixty months.
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<PAGE>
Note 3- Going Concern Considerations
The accompanying consolidated financial statements have been
presented in accordance with generally accepted accounting
principals, which assumes the continuity of the Company as a
going concern. However, during the nine months ending September
30, 1999 and September 30, 1998, the Company experienced, and
continues to experience, certain going concern and liquidity
problems. The Company has incurred net losses of $651,743 and
$516,132 for the nine months ending September 30, 1999 and
September 30, 1998. This condition raises substantial doubt to
the ability of the Company to continue as a going concern.
Management's plans with regard to this matter is as follows:
The Company through a plan formalized in fiscal year 1998,
closed the restaurant segment that had proven to be unprofitable.
The Company had planned to develop a new restaurant segment under
new management with more emphasis on a "fast food/self-service"
theme.
In addition during the nine months ending September 30, 1999, the
Company raised proceeds of approximately $1.85 million dollars
through a Regulation D 505 offering, the exercise of common stock
warrants, and a convertible debenture offering. These funds were
and are being used to satisfy the Company's debt, reconstruct and
improve current restaurant space and to complete the construction
of its food manufacturing plant.
The eventual outcome of the success of management's plans
cannot be ascertained with any degree of certainty. The
accompanying consolidated financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
Note 4- Closed restaurants
Through September 30, 1999, the Company has completed its plans
to close the operations of unprofitable restaurants. The
restaurants that were closed by management through September 30,
1999 are as follows:
Floridino's Pizza Etc., Inc.
Hard Ball Cafe, Inc.
Floridino's Home of the Calzone, Inc
Floridino's of Bartow, Inc.
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<PAGE>
Note 5- Litigation
The Company and its subsidiaries are defendants in various
lawsuits filed by various suppliers for services rendered. The
Company has accrued the amounts of the proposed settlements in
the accompanying consolidated financial statements, as well as
the amounts of potential outstanding claims disclosed by the
Company's outside counsel. Management believes that the eventual
disposition of these lawsuits will not have a material impact on
the consolidated financial statements.
Note 6- Commitments and Contingencies:
The Company leases office space under operating leases. At
September 30, 1999, total future minimum lease payments under
operating is as follows:
September 30th,
2000 $109,058
2001 $ 90,278
2002 $ 58,200
2003 $ 30,000
2004 $ 32,500
Thereafter $165,000
Total future minimum
lease payments $485,036
========
Note 7- Common Stock Transactions
During the nine months ending September 30, 1999, the balance
of warrants outstanding from an offering completed in July 1997
were exercised or expired. During the period, 558,000 warrants
were exercised resulting in net proceeds to the Company of
$346,500 and the issuance of 558,000 shares of common stock. The
balance of the outstanding warrants (63,000) expired on March 31,
1999. The exercise period of the warrants had been extended to
March 31, 1999 and the exercise price was lowered to $.50 by
management.
In August 1999, the Company issued 140,000 common stock in
return for services rendered by consultants. (see Note 11 for
further discussion).
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<PAGE>
In May 1999, the Company completed a Regulation D 505 offering
resulting in net proceeds to the Company of $1,000,0000 and
the issuance of 2,000,000 shares of common stock.
Note 8- Convertible Debentures
In September 1999, the Company received net proceeds of
$500,000 of a $750,000 debenture offering resulting in the
issuance of convertible debentures. Each debenture is
convertible into common stock within one year of purchase at a
40% discount from the preceding five day average of the
prevailing market price of the stock at conversion. As a result,
$333,334 has been recognized as a beneficial conversion feature
and is recorded as "debt discount" included in convertible debt
payable. The debt discount is being amortized over a period of
one year using the effective interest method.
The debentures are payable September 30, 2001 with interest
computed at 9.00% payable semi-annually.
Note 9- Convertible Preferred Stock
In May 1999, the Company issued 50,000 of preferred stock to an
officer of the Company in exchange for real estate transferred to
the Company. The fair market value of the real estate at the
date of the transaction was $639,000 and mortgages and liens on
the properties assumed were $440,000. The preferred stock is
convertible into 50,000 shares of common stock at $5 per share
beginning in May 2000.
Note 10- Long Term Debt
The Company has signed promissory notes in connection with
certain reconstruction costs and lease termination agreements
incurred in 1999 and in addition has assumed certain long
term real estate mortgages associated with the transfer of
preferred stock discussed in Note 9. There are no sinking fund
requirements associated with the long term debt. The following
is a listing of long term debt as of September 30, 1999.
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<PAGE>
Rate Amount Maturity
Notes Payable 8.25% 342,749 10/31/00
Mortgages 9.00% 133,349 2007
Mortgages 10.00% 130,276 2007
Totals $606,374
The notes payable were entered into on August 31, 1999 and a
balloon payment for principle and interest is due in October
2000. Notes payable of $238,020 are due to the Company's
majority shareholder and chairman of the board and are more fully
disclosed in Note 11.
Note 11- Related Parties
The Company is indebted to its majority shareholder and
chairman of the board for the cost of certain reconstruction and
lease agreements associated with the New York restaurant incurred
during 1999. The notes payable were entered into on August 31,
1999 and carry an interest rate of 8.25%. At September 30, 1999,
the Company had notes payable to the majority shareholder and
chairman of the board of $238,020 due on 10/31/00 for the
reconstruction costs. This debt is included in "Long term notes
and mortgages" on the statement of financial position. In
addition, the Company had notes payable to the majority
shareholder and chairman of the board of $65,388 due in fiscal
2000 for eight months of unpaid lease payments on the restaurant
located in New York City. These notes payable are included in
"current portion of long term debt" on the statement of financial
position and in general administrative expenses in the statement
of operations. The notes payable are due by a "balloon payment"
of principle and interest at the maturity date.
In August 1998, the Company issued 40,000 shares to a director of
the Company in return for consulting services rendered in early
1998.
Management has recorded this issuance of shares as consulting
expense and is part of general, selling, and administrative
expense in the Statement of Operations. The value of the shares
issued were determined to be $26,000 an is based upon the fair
value of the services rendered. The value of the services
provided was used rather than the market value, as required by
APB No.29,of the shares transferred because management feels that
it more properly reflects the value of the transaction.
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In August 1999, the Company issued 100,000 shares to a consulting
firm that is responsible for developing and managing the
Company's food processing plant in Winterhaven, Florida.
Management has recorded $64,000 for the issuance of shares as
consulting expense as part of general, selling, and
administrative expense in the Statement of Operations.
The consulting firm is responsible for the management of the
production facility and development of the Company's frozen food
segment. The term of the agreement is for five (5) years. In
consideration of such services, this consultant received 100,000
shares of common stock, as noted above, upon execution of the
agreement. The Company will compensate the consultant with
common stock warrants each of the remaining four years of the
agreement of which will entitle the consultant to purchase
100,000 shares of common stock in the Company at an exercise
price of $2.00 per share during the second year of the
agreement, $3.00 per share during the third year of the agreement
and $4.00 per share during the fourth and fifth year of the
agreement. The warrants will not be granted or vest to the
consultant until certain profitability levels for the production
facility have been achieved.
Note 12- Subsequent Events
In October 1999, the Company completed its debenture offering
initiated in September 1999 resulting in additional proceeds to
the Company of $250,000. The debentures contain the same terms
and provisions discussed in Note 8.
Note 13 - Segments
The following is a summary of the Company's segment information
for the nine months ended September 30TH:
9/30/99 9/30/98
Gross sales:
Restaurants $840,481 $1,364,051
Food processing $ 31,606 $ 0
Total sales $872,087 $1,364,051
======== ==========
Gross profit:
Restaurants $324,259 $ 544,923
Food processing $ 7,585 $ 0
Total gross profit $331,844 $ 544,923
======== ==========
Loss from continuing
Operations:
Restaurants ($262,495) ($ 362,227)
Food processing ($360,061) 0
Corporate ($236,924) ($ 141,979)
Total loss ($859,480) ($ 504,206)
========== ===========
Total assets:
Restaurants $1,096,126 $ 353,397
Food processing $431,680 $ 0
Corporate $1,136,144 $ 127,801
Total assets $2,663,950 $ 481,198
========== =========
Note 14 - Other Comprehensive Income
The Company has no other comprehensive income for the nine months
ending September 30, 1999.
Note 15 - Earnings Per Share
The Company applies SFAS No. 128, Earnings per share. In
accordance with SFAS No. 128, basic net income per share has been
computed based on the weighted average of common shares
outstanding.
Note 16- Non cash transactions
Certain non-cash transactions executed during the nine month
period ending September 30, 1999 have been excluded from the
Consolidated Statement of Cash Flows. These transactions include
the following:
During the period, reconstruction at Floridino's Inc. was
financed by the chairman of the board and by a general
contractor. The value of the reconstruction, recorded as a
leasehold improvement, is $535,227. The Company issued unsecured
notes payable to the chairman and to the general contractor for
$535,227, which comes due in fiscal year 2000 and carry an
interest rate of 8.25%.
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During the period, an officer transferred property to the Company
in exchange for preferred stock (see Note 9). The fair market
value of the property recorded was $639,000 and the fair value of
the short and long term debt liabilities assumed were $389,000.
During the period, the Company acquired equipment by entering
into capital lease contracts. The value of the assets acquired
and the short and long-term lease liability was $184,215.
Note 17- Restatement
Subsequent to the issuance of the Form 10Q-SB for September 30,
1999, management determined that the accounting for the
convertible debentures had been improperly stated. The improper
presentations affected the balance sheet, the statement of cash
flows and changes in shareholders' equity. The following table
indicates the accounts that have been affected by the correction
of the improper statements.
As Restated As Reported
Convertible debentures $ 166,666 $ 300,000
Paid in Capital $2,569,847 $2,436,513
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<PAGE>
PART III
Item 1. FINANCIAL STATEMENTS, EXHIBITS AND
REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS
The Following financial statements are filed as part of this
registration statement:
Balance Sheet
Statement of Loss
Statement of Cash Flows
Statement of Shareholders' Equity (Deficit)
Selected Financial Data
(B) EXHIBITS AND INDEX OF EXHIBITS
The following exhibits are included in Item 13(c). Other
exhibits have been omitted since the required information is not
applicable to the registrant.
EXHIBIT
3 Certificate of incorporation and by-laws
10.1 Agreement between Michael Floridino and Company
dated May 20, 1999
10.2 Promissory Note Between Floridino's Inc. and
Raffles Toho Inc.
10.3 Promissory Note Between Floridino's Inc. and
Raffles Toho Inc.
10.4 Promissory Note Between Floridino's Inc. and
Toho Partners, LLC
10.5 Promissory Note Between Floridino's Inc. and
Raffles Toho Inc.
10.6 Promissory Note Between Floridino's Inc. and
Toho Partners, LLC
10.7 Standard Franchise Agreement
10.8 Consulting Agreement
10.9 Promissory Note - 9.0% Series A Convertible
Preferred Promissory Note Due October 31, 2001
21 Subsidiaries of Company
27 Financial Data Schedule
(C) REPORTS ON FORM 8-K
A report on Form 8-K was filed on December 15, 1999 and it is
incorporated to this Form 10SB-12G/a by reference herein.
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<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: July 18, 2000
By: /s/ Nick Pirgousis
----------------------
Chairman of the Board
