UNITED STATES
SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10KSB/A
Annual Report Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
For fiscal year ended December 31, 1999
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-3479186
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3560 Cypress Gardens Road
Winter Haven, Florida 33884
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number (941) 326-1006
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Check here whether the issuer (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and
no disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
As of December 31, 1999, the following shares of the Registrant's
common stock were issued and outstanding:
25,000,000 shares authorized, $0.001 par value
7,657,000 issued and outstanding
As of December 31, 1999, the following shares of the Registrant's
convertible preferred stock were issued and outstanding:
200,000 shares authorized, no par value
50,000 issued and outstanding
Item 1. DESCRIPTION OF THE BUSINESS
HISTORY AND ORGANIZATION
FLORIDINO'S INTERNATIONAL HOLDINGS INC., (the "Company"), was
organized in June 1997 under the laws of the State of Florida,
having the stated purpose of engaging in any lawful act or
activity for which corporations may be organized under the
General Corporation Law of Florida.
The Company designs, develops, owns and operates family style
neighborhood Italian food restaurants featuring freshly prepared,
moderately priced pizza and pasta dishes. Floridino's restaurants
seek to incorporate a self-service upscale fast casual dining
experience for its customers providing high quality Italian
food. Its operations encompass two segments from which the
Company seeks to generate revenue: operation of restaurants and
sale of frozen foods.
FLORIDINO'S RESTAURANTS
The restaurant segment of the Company produces and provides food
products through restaurant outlets. The products focus on
Italian foods such as pasta, pizza, sandwiches and salads as an
alternative to the quick serve food industry which offer
hamburgers, chicken and fried fish.
Shareholders in late 1998 were dissatisfied with the Company's
progress and results. As a result, they demanded that changes to
management be made and that the Company undertake a fresh and
revised approach to its operations. New management then took over
the Company in early 1999 and assessed the Company's prior
results, its products and its potential for future development.
After an assessment of the Company's past performance, new
management decided to alter operations of its restaurants as they
operated in their then present format. Management determined
that the restaurants were not producing enough revenue for
the Company and that the style and concept of these restaurants
were outdated. After suspending operations at all six restaurants
during the period from November 1998 through September 1999: Hard
Ball Cafe, Pizza Etc., Lakeland, Home of the Calzone, Lake Wales,
and Bartow's, management decided to revamp the Company's image
and concept for the purpose of creating a more modern and higher
quality food product to consumers. Management also decided that
new products should be introduced which would broaden the
Company's product base and potential for revenue growth. Toho
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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 revamped its Lakeland restaurant and incorporated a
fast self service upscale concept. This restaurant operates under
the name "Mama Mia" and focuses on providing high quality Italian
food in a casual dining environment. Mama Mia restaurant
reopened on November 13, 1999. The Company in September 1999
opened an additional restaurant in New York operating under the
name "Floridino's Cafe" which provides sandwiches, soups, salads
and personal size pizza. The goal of this new restaurant is to
serve authentic Italian cuisine in a fast food environment.
The Company maintains and operates the restaurant in New York
City, through its wholly owned subsidiary "Floridino's Inc.",
under the name Floridino's Cafe. The goal of this new restaurant
is to serve authentic Italian cuisine in an upscale fast food
environment. The format is express style with customers being
served at the counter for carry out or to dine on premise. The
ambience provides for a casual dining experience in a warm,
relaxed setting. The entire premise behind Floridino's Cafe is
to accommodate the lifestyle of today's consumer demanding
quality, nutritious meals on the run.
Floridino's Inc. and Zoop Soups were acquired by the Company in
November 1998 and merged into Floridino's, Inc., a wholly owned
subsidiary of the Company. Zoop Soups specializes in creating
soup recipes provided to Floridino's Cafe. The Company intends
to market its Zoop Soups items to the general public and to
also have Zoop Soups items offered at its other restaurants in
Florida.
The Company has recently opened two (2) additional restaurants. A
location in Delray Beach opened on in January 2000. The second
restaurant in Lake Wales was delayed due to problems in obtaining
requisite permits and opened in March May 2000.
These new restaurants will operate under the name "Floridino's
Fast Italian". All of the Company's restaurants will emphasize
the prior success of the Company's calzone which is marketed by
the Company as "The World's Biggest Calzone" and include the
Floridino's fast casual self-service upscale concept.
The goal of the Company's new concept is to serve authentic
Italian cuisine in a fast food environment. This format
incorporates express style restaurants with customers being
served at the counter for carry out or on premises dining. An
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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.
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
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Company's newer upscale concept which will include strict quality
controls and adherence to this new concept. The Company is
committed to developing a strong franchise system 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.
FROZEN FOOD PRODUCTS SEGMENT
The Company also operates a frozen foods segment which develops
and produces frozen food products including calzones, pizza and
pazzo rolls. This segment operates from a 6,000 square foot
operating plant in Lakeland, Florida. New management which
assessed the Company in April 1999 decided to temporarily close
the plant after finding that its production facility and capacity
were inadequate to meet any significant demand for the Company's
frozen food product. Packaging at the plant was also not
standardized or efficient. After a renovation of the plant and
acquisition of new machinery and equipment, the Company reopened
the plant in November 1999 with the goal of commencing production
of the Company's trademark frozen food products such as its
breakfast calzone, pazzo rolls and frozen pizzas. The Company
seeks to market and sell its frozen food products through grocery
and convenience stores as well as food service entities such as
restaurants, caterers and institutional accounts. The frozen food
manufacturing segment operates under the name "Floridino's
Specialties Inc." which is a wholly owned subsidiary of the
Company.
At the present time the frozen food segment has one location in
Lakeland. It includes the production area, offices, and warehouse
area. The Company has increased the original calzone production
facility including all new equipment, installation of a new
26'(W) x 42'(L) x 20'(H) freezer and enclosing the existing dock
area to be environmentally controlled. In addition, the Company
has completed the purchase of a bordering property for future
expansion. Subject to additional demand for the Company's
products, construction is to begin in the third quarter of 2000
to convert this newly acquired property into a state of the art
manufacturing plant. These expansion plans include a full-scale
bakery, four separate production lines, appropriate support
facilities and corporate headquarters. Completion is scheduled
for the beginning of fourth quarter of the year 2000, subject to
funding. Upon completion of the new facility the existing
manufacturing area will be refurbished to strictly manufacture
Pazzo rolls and Pizzas.
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The Company on January 17, 2000 acquired all of the outstanding
shares of common stock of Triton Prestige Products, Inc. for
50,000 shares of common stock. Triton is now a wholly owned
subsidiary of Floridino's. Triton has been operating since July
1999. Its primary business is to provide frozen pizza products to
institutions, schools and governmental entities for consumption
in their cafeterias. The Triton brands of products are sold under
the Triton brand name and label.
CONSULTANTS
Any relationship with consultants shall be premised on a
performance based approach whereby the consultant will be allowed
to continue to oversee the daily operations of the Company so
long as it meets specified performance milestones set by the
Company. The consultant group shall also oversee the training of
staff, promotions and advertising. The Company believes this will
induce and inspire an aggressive management approach by a
consultant thereby effectuating positive results for the Company.
Additionally, the consultant will engage in the research and
development of new products and concepts as it relates to the
frozen food segment.
The Company has adopted an approach whereby each segment should
perform on its own. In line with this philosophy, the Company
does not intend to hire any consultant to oversee or advise on
the entire operations of the Company. Rather, management believes
that it is best to retain consultants to advise or consult
on a particular segment of the Company in which the consultant
has expertise.
It is the intent of the Company that consultants hired to advise
on a particular segment of the Company shall be paid, whenever
possible, on a performance based arrangement. Consultants hired
for the frozen food segment currently advise and consult on the
marketing of the segment, to organize and oversee the
manufacturing and engineering of that segment's production
process, to develop an organizational structure, policies and
procedures for the segment's normal operations of business and to
advise on investor relations promotions for that segment.
The Company has retained a separate consulting group, The Ephraim
Group, to oversee the entire production facility and development
of the Company's frozen food line in June 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 for
the first year of the Agreement. The Company shall each year
7
thereafter compensate the Consultant in relation to the work
performed by providing the Consultant with One Hundred Thousand
(100,000) warrants each of which will entitle the Consultant to
purchase one share of restricted common stock in the Company for
a price of $2.00 per share during the second year of the
agreement, $3.00 per share during the third year of the agreement
and $4.00 per share during the fourth and fifth year of the
agreement. The relationship with The Ephraim Group rests on a
performance based approach. The granting and vesting of the
warrants is contingent upon the satisfactory performance of the
Ephraim Group at the discretion of the chairman of the board and
the achievement of certain profitability levels of the frozen
food segment.
The Ephraim Group's has overseen the management of the frozen
foods division, has been responsible for employee production and
hiring, and had conducted research into the Company frozen foods
segment and determined that a modernization of its production
plant by acquiring new machinery which would streamline the
production of the Company's products and increase its capacity.
This would allow the Company to pursue management's aggressive
expansion plans. The Ephraim Group has also consulted the Company
on organizing the manufacturing and engineering of the Company's
production process and has advised on the purchase of additional
equipment and freezers which would be conducive to the
modernization of the plant. The Group has also advised on the
segment's organizational structure, policies and procedures as
well as potential promotions of the Company's frozen food
products.
The results of The Ephraim Group's research reflected that the
Company required a modernization of its production plant by
acquiring new machinery which would streamline the production of
the Company's products and increase its capacity. To this end,
the Company has expended approximately $456,000 to acquire new
machinery and modernize its plant during fiscal 1999.
Management of the Company is intent on spreading, and thereby
limiting, the Company's dependence on a single segment of the
market. It has therefore targeted the two areas mentioned.
Management believes each of these segments represent substantial
growth opportunities for the Company while at the same
time spreading the company's risk and dependence on a single
segment.
No specific plans to hire consultants have been made beyond the
general plan currently disclosed.
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COMPETITION
The Company recognizes vast competition in both the restaurant
and frozen food industry. In response to this, it has targeted a
niche area specializing in calzones and pazzo rolls which have
limited competition. This niche area will be exploited by
management by commencing a national marketing campaign which will
set the Company's products apart from other nationally marketed
frozen foods. Management will insist on an aggressive and
innovative market approach in order to develop and cultivate long
term growth for the Company with an aim at minimizing reliance on
any particular segment in the food industry.
The Company believes that competition in the frozen food category
is based on price, quality, marketing, sales, publicity, and
distribution. Floridino's is committed to producing a quality
product in order to separate itself from other competitors. It
plans on utilizing only premium ingredients for all of their
products. It also believes that it has identified a market niche
and possesses the ideal product to fill that void. Additionally,
the Company seeks to establish a pricing schedule which is
comparable to competitive products being targeted.
The Company finds that competition in the calzone market is
substantial. The two primary competitors manufacturing calzones
today are Stefanos and Pellegrinos. Both are regional companies
with limited distribution. Stefanos has found a niche in the
southeast region with distribution in a few respectable
grocery chains. The primary retailer for Pellegrinos is the Super
Wal-Mart chain of stores. Stefanos and Pellegrinos offer an
average product with fairly nice packaging. The product of both
these companies is machine made with the ingredients being
injected into the crust. Floridino's seeks to separate itself
from these competitors by providing a products with a homemade
look and with quality ingredients.
In the restaurant segment competition is fierce. There is an over
abundance of restaurants in the industry each offering a wide
array of themes and cuisine to choose from. The Company believes
that all such restaurants compete for a share of the incremental
dollars consumers spend in dining out. Floridino's seeks to
separate itself by staking out the upscale end of this market and
thereby separating itself from the current top competitors in
this arena. Floridino's believes that the upscale self-service
market has yet to be exploited. It strives to do so by
maintaining a clean, friendly, open and inviting environment,
appealing to consumers seeking quality food products and by
focusing on the preparation, presentation of its foods and
service.
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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 participated in various trade and
food shows to display its products and attract purchaser
interest. Where the Company is able to identify a potential
purchaser of its frozen foods, it intends on shipping to such
potential purchaser a sample of its products in order to attract
their interest.
SUBSIDIARIES
The Company has eight (8) subsidiaries all of which are wholly
owned by the Company.
There are four subsidiaries in existence which oversee and
independently operate the restaurants owned by the Company. The
names of these subsidiaries are as follows: Floridino's, Inc., a
New York Corporation, which operates the Company's restaurant in
New York City; Floridino's Express Inc., a Florida Corporation,
which operates the Company's Lake Wales restaurant which opened
in May 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." oversees the development and
production of frozen food products including calzones, pizza and
pazzo rolls.
The Company's franchising concept has the following subsidiary:
"Floridino's International Inc." oversees the Company's
franchising and licensing of the Company's concept, trademark
products and recipes.
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The Company also has another wholly owned subsidiary,"Toho
Holdings, Inc.", which holds the Company's real estate
properties. At the present time, the Company holds ownership to
five parcels of land in the State of Florida. The Company intends
to sell three of these parcels for the purpose of acquiring
additional funds to assist with the expansion and further
development of the Company. The Company has entered into a
Contract of Sale for two of the parcels, located in Winter Haven,
Florida, with a purchase price of $409,000. The Contract contains
a provision for a right of first refusal in the event another
offer is received. The closing date on this contract is scheduled
for January 15, 2000. A third parcel of land, also in Winter
Haven, Florida, is currently being listed in the market however
the Company has not entered into any Contract of Sale for this
property. The Company holds an additional two parcels of land
through Toho Holdings.
The Company on January 17, 2000 acquired all of the outstanding
shares of common stock of Triton Prestige Products, Inc. in
exchange for 50,000 shares of common stock. Triton is now a
wholly owned subsidiary of Floridino's. Triton has been operating
since July 1999. Its primary business is to provide frozen pizza
products to institutions, schools and governmental entities for
consumption in their cafeterias. The Triton brands of products
are sold under the Triton brand name and label.
The Company previously operated the following subsidiaries:
Floridino's Pizza Etc., Inc., Floridino's of Lake Wales, Inc.,
Hard Ball Cafe, Inc., Floridino's Home of the Calzone, Inc., and
Floridino's of Bartow, Inc. Operation of these subsidiaries have
been closed by the Company as they failed to realize sufficient
profit and reflect the Company's efforts to reorganize its
operations.
TRADEMARKS AND SERVICE MARKS
The Company also is the owner of various trademarks and service
marks which are utilized by the Company in the course of its
business. The service mark "Home of the World's Largest Calzone"
is utilized to promote the Company's restaurant division and also
the frozen foods division. The service mark "Floridino's" is
used to promote all three of the Company's divisions which
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
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Franchise Agreements. The Company has also filed an application
for the registration of the service mark "Fast Italian" which is
currently pending.
As of December 31, 1999, there were approximately 55 employees of
the Company. Within the next year, and as the Company opens
additional restaurants and expands its frozen food segment, the
Company will hire additional employees. As the number of
employees increases, any rise in the cost of labor will have a
more significant impact on the Company which may in turn cause
the Company to increase its prices.
The frozen food products which are produced by the Company are
subject to inspection and approval by the U.S. Department of
Agriculture. The Company facilitates inspection by the requisite
government inspector on the premises of the Company's production
plant who insures that all of the goods produced by the
Company are in compliance with the regulations and guidelines of
the Department of Agriculture.
Item 2. DESCRIPTION OF PROPERTY
As of December 31, 1999, the Company held ownership to five (5)
parcels of land situated in the State of Florida as follows:
i. A parcel at 300 Cypress Gardens Road, Winterhaven
Florida, valued at $375,000 and possesses encumbrances
of $180,000. The land is approximately 31,320 square
feet and is the site of one of the Floridino's
restaurant in Winterhaven. The site also contains five
residential units in the rear of the restaurant.
ii. A parcel of land at 1810 Third Street SE, Winter
Haven, Florida is valued at $125,000 and possesses
encumbrances of $140,000. These two parcels have been
Contracted for Sale at $400,000 and sold in January
2000.
iii. A parcel at 3560 Cypress Gardens Road, Winter
Haven, Florida, is valued at $139,000 and possesses
encumbrances of $120,000. This is the location of the
company's corporate offices and is approximately 2,520
square feet.
iv. The parcel at 8135 Highway 33N, Lakeland, Florida
is located adjacent to the company's frozen food
processing plant.
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v. The parcel at 8141 State Road 33 North, in
Lakeland, Florida is the site of the Company's frozen
food production plant. The production plant is
approximately 6,000 square feet and its value is
approximately $400,000. An expansion of the Company's
production plant would likely occur once additional
funding is raised on the property adjacent to the plant
which is 7,000 square feet.
On a consolidated basis, the Company's fixed assets associated
with equipment and fixtures as of December 31, 1999 are as
follows:
Equipment $572,180
Leasehold Improvements 942,512
Buildings 859,000
Vehicles 17,232
Furniture 2,885
The Company also is the owner of various trademarks and service
marks which are utilized by the Company in the course of its
business. These are as follows: The service mark "Home of the
World's Largest Calzone" bearing ser. no. 74-468,809
and filed December 14, 1993; The service mark "Floridino's"
bearing ser. no. 74-468,810 and filed December 13, 1993; "The
service mark "Zoop Soups"; The trademark and design of
"Floridino's, Home of the World's Largest Calzone" and
the trademark and design of "Everything's Going Pazzo at
Floridino's". The Company has assigned no value to trade marks
and service markets in its financial statements at December 31,
1999.
ITEM 3. LEGAL PROCEEDINGS
There are no legal proceedings outside of the ordinary course of
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders.
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Part II
Item 5. MARKET PRICE OF AND DIVIDENDS FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's common stock has been traded on the OTC Bulleting
Board under the symbol "FDNO". The following table sets forth,
for the periods indicated, the high and low sale prices for the
shares of common stock as reported by OTC:
High Low
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Fiscal Year Ended December 31, 1997:
Fourth Quarter ..................................$6.00 $5.00
Fiscal Year Ended December 31, 1998:
First Quarter....................................$5.50 $5.25
Second Quarter...................................$5.50 $4.00
Third Quarter....................................$5.75 $5.375
Fourth Quarter...................................$5.50 $5.00
Fiscal Year Ended December 31, 1999:
First Quarter....................................$6.0625 $5.00
Second Quarter...................................$6.125 $5.00
Third quarter ...................................$7.875 $5.625
Fourth quarter ..................................$8.875 $6.00
The source of the bid information provided in this section are
the quotations as provided by the OTC. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
No dividends have been declared to date by the Company. The Board
of Directors may declare and pay dividends upon the outstanding
shares of the Company, from time to time and to such extent as
they deem advisable, in the manner and upon the terms and
conditions provided by statute and the Company's Certificate of
Incorporation. Before payment of any dividend there may be set
aside out of the net profits of the Company such sum or sums as
the directors, from time to time, in their absolute discretion,
think proper as a reserve fund to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other purpose as the
directors shall think conducive to the interests of the
corporation, and the directors may abolish any such reserve in
the manner in which it was created.
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Shares owned by insiders, officers and directors totaling
3,472,700 are deemed "restricted securities" as that term is
defined under the Securities Act; and in the future these shares
may be sold under Rule 144, which provides in essence, that a
person holding restricted securities for a period of one year may
sell every three months an amount equal to the greater of (a) one
percent of the Company's issued and outstanding common stock or
(b) the average weekly trading volume of the common stock during
the four calendar weeks prior to such sale.
As of December 31, 1999, there were approximately 125
shareholders of the Company.
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ITEM 6. SELECTED FINANCIAL DATA
For the Year
Ended
Dec. 31, 1999
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Cash and Cash Items $ 359,449
Marketable Securities 471,250
Notes and Accounts Receivable 0
Allowances for doubtful accounts 0
Inventory 52,354
Other Current Assets 0
Total Current Assets 883,053
Property, plant and equipment 2,713,816
Accumulated depreciation (274,729)
Total assets 3,366,317
Total current liabilities 1,432,771
Bonds, mortgages and debt
Net of current portion 1,211,812
Preferred stock 250,000
Common stock 7,657
Other stockholders' equity 464,137
Total Liabilities and
Stockholders' equity 3,366,317
Net Sales of Tangible
Products 858,052
Total Revenues 893,193
Cost of Tangible Goods Sold 619,082
Total Costs and Expenses
Applicable to sales
and revenues 1,677,873
Other costs and expenses 0
Provision for doubtful accounts 0
Interest and amortization of
Debt discount 179,031
Income before taxes and
and other items (1,172,679)
Income tax expenses 0
Income/loss continuing
operations (1,403,762)
Discontinued operations 0
Extraordinary items 78,533
Cumulative Effect - changes in
Accounting principles 0
Net Income or loss (1,094,146)
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF
OPERATION
The Company designs, develops, owns and operates family style
neighborhood Italian food restaurants featuring freshly prepared,
moderately priced pizza and pasta dishes. Its operations
encompass two segments from which the Company seeks to generate
revenue: operation of restaurants and franchising, and the
production and sale of frozen foods.
During the past two years, the Company's operations failed to
realize net income due to a decrease in revenue and reduction in
patrons to its restaurants. The Company also experienced a
decrease in franchising fees and royalties as the franchise
stores operating under the Company's concept were also
experiencing decreased revenue. This led the Company to believe
that it required a new approach to its operations. The Company's
management was replaced in March 1999 and new management has
sought an aggressive approach to develop and market the Company's
product which management believes is of very high quality. New
management determined that the Company's restaurants required a
fresher, more-upscale fast service image and ambiance to attract
customers.
The Company in the past year has raised funding of approximately
$2.1 million though the sale of equity and debentures which has
been used to revamp and reconstruct the Company's operations.
These funds have been used to modernize the Company's frozen
foods development plant by acquiring equipment to streamline the
operation of this segment and also to construct and develop its
restaurants. Management's goal is to have a state of the art
processing plant producing the Company's line of frozen foods.
The Company has also expended the funds it has raised to revamp
its restaurant concept. New management determined that the
Company should create restaurants which were more upscale and
esthetically pleasing to customers than those previously
operated. As a result the Company shut all of its existing
restaurants. After a period or reconstruction, it reopened and
then implemented its new concept at restaurants in Lakeland,
Florida and New York, New York.
The Company opened two additional restaurants in Del Ray Beach,
Florida and Lake Wales, Florida in May 2000 and December 1999.
Funding of the Company's reconstruction and revamping has been
undertaken primarily through the private sale of equity and
debentures in the Company. The funds were used to repay previous
debts of the closed restaurants, acquire new property and
17
<PAGE>
equipment and machinery for the development of the Company's
frozen food plant and for the reconstruction costs associated
with the development of the Company's restaurants adhering to
management's new theme. The Company believes that it has the
capacity to raise additional funds if and when they are required.
Additional funds may be raised through the sale 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 to enable the Company to secure a
line of credit with a financial institution, if needed.
As noted by our auditors report dated March 22, 2000 on the
financial statements as of December 31, 1999, there is a
substantial doubt raised about the ability of the Company to
operate as a going concern based upon the substantial losses
that the Company has incurred. As noted, the Company's addressed
this issue by closing all unprofitable restaurants during fiscal
year 1999. The Company raised approximately $2.1 million during
the year in order to implement management's plan to reorganize
the Company and to redirect the Company's focus to future
profitability.
During the year ending December 31, 1999, the Company raised
$1,000,000 in a private offering of common stock, $750,000 in a
debenture offering, and $346,500 upon the exercise of common
stock warrants. The debentures mature in October and September
2001 and carry interest of 9%. The debentures are convertible
into common stock at the average market price of the stock of the
five days preceding conversion, less 40%. The debentures are
convertible into common stock starting in September and October
2000. In addition, the Company borrowed $500,000 from a financial
institution during the last quarter of fiscal 1999. The loan is
secured by the plant building and land and carries interest of
9%. The loan matures in fiscal year 2002. The Company used these
proceeds to satisfy approximately $166,000 of the outstanding
long-term debt attributable to the closed restaurants. At
December 31, 1999, $159,112 of loans attributable to the closed
restaurants remains unpaid. The loans are secured by restaurant
equipment and the Company is currently in the process of
negotiating the resolution of this debt.
In addition, the Company used $320,000 of the proceeds to
purchase the land adjacent to the food processing plant in order
to satisfy future expansion plans. In addition, management
executed its option to buy the plant structure in
18
the fourth quarter of fiscal year 1999 for $225,000. The Company
expended approximately $775,000 during the year to upgrade the
plant facility and to reconstruct and upgrade restaurant space.
Management's reorganization efforts were substantially completed
by the fourth quarter of 1999. The plant had been reconstructed
to satisfy the needs of the expected demand for the Company's
product and USDA requirements. A testing phase of the Company's
frozen food products was completed in the fourth quarter of
1999 and the results were excellent. The frozen food segment
began operations in January 2000 and the initial results are
encouraging.
In addition, the improvement of the New York restaurant and the
Lakeland restaurant was completed and the restaurants were
reopened in the latter part of fiscal 1999. The restaurants were
reorganized to conform to management's vision of a fast, self-
service, casual Italian food restaurant. The Company opened two
additional restaurants under this new theme in December 1999 and
May 2000.
As of December 31, 1999, the Company's restaurant equipment was
used to secure capital leases and bank loans in the amount of
$286,670. In addition, the Company's real estate assets were used
to secure approximately $914,000 of short and long-term debt.
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 these expenditures include those
derived from the Company's sale of the two parcels of real estate
received from an officer of the Company in exchange for preferred
stock. The Company has entered into a Contract of Sale for two of
the parcels, located in Winter Haven, Florida, with a purchase
price of $409,000. The closing date on this contract is scheduled
for January 15, 2000. A third parcel of land, also in Winter
Haven, Florida, is currently being listed in the market however
the Company has not entered into any Contract of Sale for this
property.
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
19
<PAGE>
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.
In the opinion of management, inflation at this time has not and
will not have a material effect on the operations of the Company.
Management focuses on the long term growth of the Company and
therefore any increase in inflation or jump in the price of raw
goods purchased by the Company will not result in an immediate
increase in prices to the consumer. Management believes that an
increase in its prices may lead to a loss of customers and
therefore hinder the Company's long term growth. At any course
however, management will evaluate the possible effects of
inflation on the Company as it relates to its business and
operations and proceed accordingly.
The Company would consider raising its prices in the event of a
significant increase in the cost of labor. As of December 31,
1999, the Company had 55 employees. Within the coming year, and
as the Company opens additional restaurants and expands its
frozen food segment, the Company expects to hire additional
employees. As the number of employees increases, any rise in the
cost of labor will have a more significant impact on the Company
which may in turn cause the Company to increase its prices.
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.
20
The Company's operating history, including its losses and
revenues, primarily reflect its operations for the past year. For
the year ending December 31, 1999 the Company had $ 893,193 in
revenue and a net loss of $ 983,035. As of December 31, 1999 the
Company had a net shareholder equity of $566,238.
I. Segment Reporting Disclosures
The Company operates two business segments: restaurants and
franchising, and food processing. In November 1998, management
decided to close all of its existing restaurants at that time and
to restructure a new restaurant concept that emphasized a "fast
casual, self-service" style of food delivery as opposed to the
more traditional type of restaurant that it had in place at the
time. The Company would still concentrate its marketing efforts
in Italian foods. The Company's staff was reorganized and its
restaurant space was reconfigured to deliver its food products
according to the new philosophy. During 1999, the Company opened
two restaurants after a period of reconstruction and staff
reorganization, Floridino's, Inc., and Floridino's of Lakeland,
Inc. In the first and second quarter of fiscal year 2000, a
restaurant was opened in Del Ray Beach, Florida and a restaurant
was opened in Lake Wales, Florida.
The food processing plant was completed in 1999 and began
operations in January of 2000. During 1999, the processing plant
was being reconstructed to conform to USDA guidelines and to the
requirements imposed by 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
be able to meet the expected demand that was estimated. In order
to meet the anticipated demand that was estimated by the
potential customers, the plant had to be refitted and upgraded.
This period of upgrade was completed and all requirements of the
potential customers regarding the plant had been satisfactorily
met in 1999.
Please see the discussion and analysis that follows.
Restaurant Segment: Results of Operations
Gross sales for the year ending December 31, 1999 for the
restaurant division decreased to $860,099 or 48% from gross sales
for the similar period in 1998. Consequently gross profit for the
21
<PAGE>
year also decreased to $288,727 or 55% as compared to the similar
period in 1998. As expected, this decrease was due to the closing
of the unprofitable restaurants in 1999, thereby decreasing gross
sales revenues. During the fiscal year 1998, the gross sales of
the restaurants that were closed totaled approximately
$1,578,000. During the fiscal year 1999, these particular
restaurants generated approximately $403,000 in restaurant sales.
Gross profits as a percentage of total revenues decreased to 34%
for fiscal year 1999 as compared to 38% for fiscal year 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 twelve months
ending December 31, 1999, depreciation expense was approximately
$171,000 for the segment as compared to approximately $70,000 for
fiscal year 1998. Approximately $160,000 of gross profits during
fiscal year 1999 are attributable to the closed restaurants.
Selling, general, and administrative costs for this segment
decreased to $820,308 as compared to $1,070,888 for the similar
period in 1998, or 23%. This decrease is attributable to closing
of the unprofitable restaurants in 1999 resulting in overhead
savings. During the period of reconstruction for the New York
restaurant, management decided to retain many of its employees.
Management concluded that the costs of hiring and training new
employees at the end of the reconstruction period would have been
greater than the costs of keeping the employees on salary during
the reconstruction period. The Company spent approximately
$120,000 in salaries and rents during the reconstruction period
in 1999. Management has estimated that the closing of the
unprofitable restaurants saved approximately $371,000 in general
and administrative overhead during the fiscal year. 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 for
the period is attributable to the restaurants that were being
closed.
The restaurant segment showed a loss from continuing operations
of $531,581 as compared to a loss of $434,562 for a similar
period in 1998. However, management is encouraged by the results
obtained from the reorganization of the restaurant segment
undertaken in late 1998 and through 1999 and expects that the
benefits of this reorganization to be realized in 2000.
22
Processing Plant: Results of Operations
Towards the end of 1998, the Company decided that a significant
profit could be made from the production and marketing of its
unique style of Italian food products, specifically; calzones and
pizza rolls. Based upon the initial response to its products from
large Italian food franchises located in Florida and from large
nationwide retail fast food outlets, the Company decided to open
this segment in early 1999 and began operations in January 2000.
The Company contracted with a consulting firm to oversee the
plant operations and manage plant personnel. In addition, the
Company expended approximately $456,000 for equipment and
construction of its plant facility.
During the year ending December 31, 1999, the processing segment
incurred losses from continuing operations of $515,488. The
significant components of this cost were approximately $258,000
for plant salaries and consulting fees, $178,000 for supplies,
rent and utilities, and $48,000 in depreciation expense. The
plant staff have been on salary since the first quarter of 1999,
and throughout the reconstruction period. The reconstruction was
completed during the last quarter of 1999. The gross sales and
cost of sales figures generated reflect the results of test sales
performed in late 1999 for potential customers of the Company's
products. During the last quarter of 1999, the Company succeeded
in passing all phases of the product testing phase and began
actual operations in January 2000. Management is encouraged by
the initial results achieved by this segment.
Consolidated Company
On a consolidated basis, gross sales decreased from $1,669,271 in
1998 to $893,193 in 1999, or 46%, as a result of management's
plan to reorganize the restaurant segment. Gross profit as a
percent of sales decreased in 1999 from 38% to 30%. This decrease
is a result of management's efforts to move from a full service
restaurant concept to a fast, self-service concept. Historically,
a full service restaurant has higher profit margins and less
volume while the self-service restaurant has lower profit margins
but higher volume. In addition, depreciation expenses allocated
to cost of goods sold were substantially higher than in fiscal
year 1998. These increases resulted from the significant
equipment acquisitions and construction costs incurred during the
fiscal year.
23
<PAGE>
On a consolidated basis, corporate overhead increased to
$1,677,873 through December 31, 1999 from $1,134,787 for the
similar period in 1998. The main components of this increase were
$250,000 in professional fees and consulting costs attributable
to the Company's restructuring, $100,000 in payroll reflected the
hiring of plant personnel, and $150,000 in rent on the new plant
facility.
The Company has recognized an unrealized gain on short term
marketable investments of $380,321 and a realized gain on short
term marketable investments of $29,793 as a result of its
investment in shares of Cantebury Investing Inc. (CITI). The
investment is made for speculative purposes and is classified as
a trading security as per SFAS 115. The Company intends to sell
this investment during fiscal 2000.
Interest expenses has increased to $179,031 in 1999 as compared
to $29,322 in 1998 as a result of the increase in capital leases
the Company has entered into in 1999, the interest accrued on the
convertible debentures, and the assumption and acquisition of
mortgages on real estate assets acquired. In addition, the
beneficial conversion feature of the convertible debentures
calculates to $500,000 and is recognized as an addition to paid
in capital. The beneficial conversion feature, or debt discount
is being amortized as interest expense over a period of one year,
at which time, the debentures become convertible. Amortization
of the debt discount to interest expense at December 31, 1999
amounted to $111,111.
After interest expense and the recognition of the favorable
settlement of the Company's long term debt of $78,533, the
Company realized a net loss of $1,094,146 or $.18 per share as
compared to a loss of $519,187 or $.19 per share for a similar
period in 1998.
Discussion of Financial Condition- Liquidity and Capital
Resources
At December 31, 1999, the Company had working capital deficit of
$549,718 as compared to a deficit of $855,053 at December 31,
1998. On a consolidated basis, the Company had cash balances
totaling $359,449 as compared to $15,502 at December 31, 1998.
This increase is primarily due to the offering of 2,000,000
shares of common stock in May 1999 for $1 million and the
issuance of $750,000 in convertible debentures in September and
October of 1999 and $346,500 raised by the exercise of common
stock warrants and the acquisition of long term debt of
approximately $500,000 less property and equipment purchases of
24
approximately $1,089,000 and the payment of long term debt of
approximately $336,000 and operating losses of approximately
$1,094,000.
Total current liabilities increased to $1,432,771 at December 31,
1999 as compared to $897,464 at December 31, 1998. The
substantial increase in current liabilities is primarily due to
the increase of approximately $595,000 of unsecured debt
currently due, incurred as a result of the reconstruction of the
New York restaurant.
The net property and equipment of the Company increased
$1,927,065 during fiscal 1999 to $2,439,087 at December 31, 1999.
The main components of this increase were approximately $225,000
for the purchase of the plant, $456,000 in the acquisition of
plant assets for the processing segment, $318,000 for
construction costs for the restaurant segment, $639,000 in three
buildings acquired from an officer of the firm in return for
preferred stock, and the purchase of land adjacent to the plant
for $320,000. In addition, the Company decided to write off the
book value of approximately $55,000 of restaurant equipment of
the closed restaurants.
Capital lease financing obligations increased to $127,558 at
December 31, 1999 from $49,200 at December 31, 1998. This
increase is due primarily to the increase in equipment leases
entered into during 1999 on behalf of the frozen food processing
segment. Long-term debt increased to $1,444,678 at December 31,
1999 as a result of the costs of reconstruction and the
assumption of real estate mortgages in the preferred stock
transaction noted above and $500,000 in real estate mortgages
acquired in the last quarter of 1999.
Stockholders equity increased to $721,794 at December 31, 1999
from a deficit of $370,560 at December 31, 1998. The main source
of this increase was $1,000,000 raised in May 1999 through a
secondary offering of common stock, $250,000 of preferred stock
issued to an officer of the firm in exchange for liabilities owed
to the officer, and the recognition of $500,000 as a favorable
conversion feature from the debenture offering, $346,500 in
proceeds from the exercise of common stock warrants, and a net
loss from operations of approximately $1,094,000.
25
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
Floridino's International Holdings, Inc. and its Subsidiaries
We have audited the accompanying consolidated balance sheet of
Floridino's International Holdings, Inc. ("the Company") and its
Subsidiaries as of December 31, 1999, and the related
consolidated statements of operations, shareholders' equity, and
cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audit. The statements of
operations, shareholders' equity, and cash flows of Floridino's
International Holdings, Inc. and its Subsidiaries for the year
ended December 31, 1998, were audited by other auditors whose
report dated October 12, 1999, expressed a qualified opinion on
those statements regarding an uncertainty as to the Company's
ability to continue as a going concern.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, based on our audit, the consolidated financial
statements referred to above present fairly, in all material
respects, the consolidated financial position of Floridino's
International Holdings, Inc. and its Subsidiaries at December 31,
1999, and the consolidated results of its operations and its cash
flows for the year then ended, in conformity with generally
accepted accounting principles.
As more fully discussed in Note 2 to the financial statements,
there are significant matters concerning the Company that raise
substantial doubt as to the ability of the Company to continue as
a going concern. Management's plans with regard to these maters
are also described in Note 2 to the financial statements. The
financial statements do not contain any adjustments that might
result from the outcome of this uncertainty.
26
<PAGE>
As more fully disclosed in Note 17 to the financial statements,
the Company has restated the consolidated balance sheet and the
related statement of operations, shareholders' equity, and cash
flows as of and for the year ended December 31, 1999. The
restatement was necessary in order to reflect the accounting for
the issuance of a convertible debenture with a favorable
conversion feature. Professional standards requires the Company
to allocate to interest expense the favorable conversion feature
and amortize such portion until the conversion can be exercised.
Accordingly, an additional $111,111 has been recognized as
interest expense in the accompanying consolidated statement of
operations for the year ended December 31, 1999, and a discount
for the debenture of $388,889 has also been reflected on the
accompanying consolidated balance sheet as of December 31, 1999.
Berkovits & Company, P.A.
Miami, Florida
March 22, 2000
27
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
(AS RESTATED)
ASSETS
<TABLE>
<S> <C>
Current Assets
Cash $359,449
Investments in marketable equity securities 471,250
Inventory 52,354
----------
Total Current Assets $883,053
Property and Equipment, net 2,439,087
Other Assets
Deposits and other assets 42,547
Organizational costs(net of amortization) 1,690
-----------
Total Other Assets 44,237
TOTAL ASSETS $3,366,377
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $490,924
Accrued expenses 61,200
Notes payable to banks 159,112
Current portion of obligations under capital leases 21,669
Current portion of long term debt 699,866
-----------
Total Current Liabilities $1,432,771
Capital lease obligations 105,889
Long term debt 744,812
Convertible debentures (net of amortization) 361,111
SHAREHOLDERS' EQUITY
Common stock, par value $.001; authorized
25,000,000 shares; issued and outstanding
7,657,000 shares at December 31, 1999 $7,657
Preferred stock, 200,000 shares authorized;
50,000 shares issued and outstanding, convertible
to 50,000 shares of common stock, no par value,
nonparticipating 250,000
Additional Paid in Capital 2,736,513
Accumulated Deficit (2,272,376)
----------
Total Shareholders' Equity 721,794
--------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,366,377
============
</TABLE>
The accompanying notes are an integral part of these financial
statements. The financial statements and the notes should be read
in conjunction with the auditor's report.
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(AS RESTATED)
<TABLE>
December 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
REVENUES
Food and Beverage Sales $ 858,052 $1,577,564
Franchise revenues 35,141 59,500
Royalty revenues - 32,207
--------- --------
Total Revenues 893,193 1,669,271
Less cost of goods sold 619,082 1,032,945
--------- ---------
Gross Profit 274,111 636,326
OPERATING EXPENSES:
General Administrative 1,519,886 996,232
Cost of store closing 157,987 138,555
---------- ---------
Total Operating Expenses 1,677,873 1,134,787
---------- ---------
Net loss from operations (1,403,762) (498,461)
OTHER INCOME (EXPENSES):
Unrealized gain on short
term investment 380,321 --
Other income 29,793 8,596
Interest expense (179,031) (29,322)
---------- ----------
Total other income (expenses) 231,083 (20,726)
LOSS FROM OPERATIONS BEFORE
INCOME TAX PROVISION AND
EXTRAORDINARY ITEM (1,172,679) (519,187)
Provision for Income taxes -- --
LOSS FROM OPERATIONS BEFORE
Extraordinary item (1,172,679) (519,187)
EXTRAORDINARY ITEM:
Gain on early extinguishment
of debt (net of $40,457
tax credit) 78,533 --
----------- ----------
Net loss (1,094,146) (519,187)
=========== ==========
Net Loss per common share:
Basic:
Loss from continuing operations $(19) $(0.19)
Gain from extraordinary item $0.01 $0.00
Net loss per share $(.18) $(0.19)
Weighted average shares
outstanding 6,273,134 2,698,974
============ ===========
</TABLE>
The accompanying notes are an integral part of these financial
statements. The financial statements and the notes should be read
in conjunction with the auditor's report.
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(AS RESTATED)
<TABLE>
December 31, December 31,
1999 1998
----------- ------------
<S> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Loss $(519,187) $(1,094,146)
Adjustments to Reconcile
Net Income Items Not
Requiring the use of cash:
Depreciation and
Amortization 245,771 91,214
Compensation expense paid
By issuing common stock 90,000 --
Unrealized gain on short
Term Investment (380,321) --
Bad debt expense 14,255 --
Cost of store closings 157,987 --
Amortization of debt discount 111,111
Changes in Assets and Liabilities
Royalties Receivable 11,826 424
Inventory (37,271) 3,452
Short term investments (90,929) --
Other Assets 42,528 (7,729)
Deferred franchise fee revenue -- (59,500)
Accounts payable 180,369 45,048
Accrued expenses (74,872) 66,091
---------- ----------
NET CASH USED BY OPERATIONS (823,692) (380,187)
INVESTING ACTIVITIES:
Payments of bank overdrafts (19,903) 18,759
Purchase of land adjacent to
Plant (320,000) 0
Purchase of
Property and Equipment (769,032) 39,501
---------- ----------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES (1,108,935) 58,260
---------- ----------
FINANCING ACTIVITIES:
Obligations to Banks 159,112 --
Proceeds from issuance of
convertible debentures 750,000 --
Increase (decrease) in loan
to stockholder (152,799) 131,728
Issuance of common stock upon
Exercise of warrants 346,500 261,000
Issuance of common stock 1,000,000 --
Payment of long term capital
lease obligations (49,206) (24,280)
Payment of long term debt (335,608) (31,019)
Proceeds of
long term debt 558,575 --
---------- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 2,276,574 337,429
---------- ----------
NET INCREASE IN CASH DURING
THE PERIOD 343,947 15,502
CASH BALANCE AT BEGINNING OF
FISCAL YEAR 15,502 --
CASH BALANCE AT END OF
THE PERIOD 359,449 15,502
========== ===========
SUPPLEMENTAL DISCLOSURES:
Interest paid during
the period 67,920 29,322
Acquisition of fixed assets by
capital leases 127,564 49,200
Acquisition of fixed assets by
long term debt 495,227 --
Acquisition of fixed assets by
the assumption of long term
debt and issuance of preferred
stock 509,535 --
Stock issued for acquisition of
fixed assets -- 87,079
Stock issued for acquisition
of subsidiary -- 337,442
</TABLE>
The accompanying notes are an integral part of these financial
statements. The financial statements and the notes should be read
in conjunction with the auditor's report.
<PAGE>
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
(AS RESTATED)
<TABLE>
Common Stock Preferred Stock Paid in Accumulated
Shares Amount Shares Amount Capital Deficit Total
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
JANUARY 1,1998 2,518,000 $2,518 - $ - $119,631 $(659,043) $(536,894)
Issuance of common
stock upon exercise
of warrants 261,000 261 - - 260,739 - 261,000
Issuance of common
stock for the
purchase subsidiary
1,680,000 1,680 - - 335,762 - 337,442
Issuance of common
stock for equipment
500,00 5,100 - - 86,579 - 87,079
Net Loss - - - - - (519,187) (519,187)
-----------------------------------------------------------------
BALANCE AT
DECEMBER 31,
1998 4,959,000 4,959 - - 802,711(1,178,230) (370,560)
Issuance of common
stock upon exercise
of warrants 558,000 558 - - 345,942 - 346,500
Issuance of
common stock for
compensation 140,000 140 - - 89,860 - 90,000
Issuance of
common stock
for secondary
offering 2,000,000 2,000 - - 998,000 - 1,000,000
Issuance of
preferred
stock - - 50,000 250,000 - - 250,000
Proceeds from
debentures
attributed to
favorable
conversion
feature 500,000 500,000
Net loss (1,094,146)(1,094,146)
BALANCE AT
DECEMBER 31,
1999 7,657,000 $7,657 50,000 250,000 2,736,513(2,272,376) 721,794
</TABLE>
The accompanying notes are an integral part of these financial
statements. The financial statements and the notes should be read
in conjunction with the auditor's report.
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
Note 1 - Nature of Operations and Summary of Significant
Accounting Policies
Floridino's International Holdings, Inc. (the Company) was
incorporated on June 25, 1997 in the State of Florida to develop,
own, operate, and franchise family style Italian restaurants. The
company's operations are located in New York City, New York and
throughout Florida. The consolidated statements of the Company
include the following wholly owned subsidiaries:
Floridino's Pizza Etc., Inc.- a restaurant located in
Winterhaven, Florida that was closed in October 1999.
Hard Ball Cafe,, Inc.- a restaurant located in Winterhaven,
Florida that was closed in April 1999.
Floridino's Home of the Calzone, Inc.- a restaurant located in
Lakeland, Florida that was closed in May 1999.
Floridino's International, Inc.- a restaurant franchiser located
In Winterhaven, Florida.
Floridino's of Bartow, Inc.- a restaurant located in Bartow,
Florida that was closed in December 1998.
Floridino's Specialties Distributions, Inc.- an Italian food
manufacturer located in Lakeland, Florida incorporated in July
1998.
Floridino's Express, Inc.- a restaurant located in Lake Wales,
Florida that was incorporated in January 1999.
Toho Holdings, Inc.- a company incorporated in 1999 to hold title
to the real estate and lease agreements of the consolidated
companies.
Floridino's , Inc.- a restaurant located in New York, New York,
formerly Zoop Soups Inc. This restaurant was reopened in
September 1999 after a period of reconstruction.
Floridino's of Lakeland- a restaurant located in Lake Wales,
Florida incorporated in September 1997. This restaurant was
opened in January 1998, closed for reconstruction in October
1999, and reopened in November 1999.
36
Lake Wales- a restaurant located in Lake Wales, Florida that was
closed in September 1998.
Del Ray- a restaurant incorporated in November 1999 located Del
Ray Beach, Florida that was opened in January 2000.
Consolidation-The accompanying consolidated financial statements
include the accounts of the company and all of its wholly owned
and majority owned subsidiaries. All significant inter-company
balances have been eliminated.
Revenue and Cost Recognition-The Company recognizes revenue from
food and beverage sales as the service is provided. Revenue from
franchise sales is recognized, net of allowance of uncollectible
amounts, when substantially all significant services provided by
the Company have been performed which normally occur prior to the
start of the operations. Expenditures are recorded on the accrual
basis whereby expenses are recorded when incurred, rather than
when paid.
Use of Estimates-The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make reasonable estimates and assumptions that
affect the reported amounts of the assets and liabilities and
disclosure of contingent assets and liabilities and the reported
amounts of revenues and expenses at the date of the financial
statements and for the period they include. Actual results may
differ from these estimates.
Cash and cash equivalents-Cash equivalents include highly liquid
short-term investments with an original maturity of three months
or less. Trading securities are not considered cash equivalents
and are shown separately as investments in marketable securities.
Investment in Marketable Securities-Investment in marketable
securities represents the purchase of common stock of a publicly
trade company. As per Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and
Equity Securities", the Company classifies this investment as a
"trading security" and accordingly, the investment is recorded
at fair market value at December 31, 1999 and an unrealized gain
of $380,321 has been reflected as "other income" in the statement
of operations.
The Company utilizes the specific identification method in
determining holding gains and losses on investments in marketable
securities.
37
<PAGE>
Inventory-Inventory is stated at the lower of cost (first-in,
first-out method) or market and primarily consists of food and
beverage products.
Property and Equipment-Property and equipment are stated at cost.
Depreciation of property and equipment is provided using the
straight-line method over the estimated useful life of the asset.
Improvements made to leased property are depreciated on a
straight-line basis over the estimated useful life of the
improvement or the period of the lease remaining, whichever is
less. The following is a summary of the estimated useful lives
used in computing depreciation expense:
Equipment 5 years
Leasehold improvements 5-10 years
Vehicles 5 years
Buildings 30 years
Furniture & fixtures 5 years
Expenditures for major repairs and renewals that extend the
useful life of the asset are capitalized. Minor repair
expenditures are charged to expense as incurred.
Income Taxes-The Company accounts for income taxes under the
accrual method established by Statement of Financial Accounting
Standards No. 109, which requires recognition of deferred tax
assets and liabilities for the expected futures tax consequences
and events that have been included in the financial statements or
tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the
financial statements and tax bases of assets and liabilities
using enacted rates for the year in which the differences are
expected to reverse.
Management believes that based on current operations, the
realization of a tax-deferred asset will not be utilized.
Therefore, a deferred tax asset has not been reflected in the
accompanying financial statements as of December 31, 1999.
Extraordinary items-During the year ending December 31, 1999, the
Company had extinguished certain long term debt before its
scheduled maturity date. The difference between the carrying
value of this debt and the settlement value of the debt
extinguished has been recognized as an extraordinary item in the
consolidated statement of operations, net of the related tax
effect.
38
Fair Values of Financial Instruments-The carrying amounts of all
cash and cash equivalents, accounts receivables, short term
investments, inventories, accounts payable, and other obligations
reported in the statement of financial position are estimated by
management to approximate fair value.
Recent accounting pronouncements - Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities",was issued in June 1998 and
is effective for fiscal quarters beginning after June 15, 1999.
This statement establishes accounting and reporting standards for
derivative instruments and for hedging activities and requires
that entities recognize derivative instruments as either assets
or liabilities in the statement of financial position and measure
these instruments at fair value. Management has concluded that
the adoptions of SFAS No. 133 will not have a material impact on
the financial position of the Company or its results of
operations.
Concentration of credit risk-Financial instruments which
potentially subject the Company to concentration of credit risk
consist primarily of cash deposits and investments in marketable
securities. The Company had cash demand deposit accounts of
approximately $100,000 in domestic banks at year-end which were
not insured. In addition, the Company has investments in a common
stock of approximately $471,000 at year-end. The market for this
stock is not highly liquid due to the small float of the stock.
Note 2-Going Concern Considerations
The accompanying consolidated financial statements have been
presented in accordance with generally accepted accounting
principles, which assumes the continuity of the Company as a
going concern. However, during the years ending December 31, 1999
and December 31, 1998, the Company continues to experience
certain going concern and liquidity problems. The Company has
incurred net losses of $983,035 and $519,187 for the years ending
December 31, 1999 and December 31, 1998. This condition raises
substantial doubt to the ability of the Company to continue as a
going concern.
Management's plans with regard to this matter is as follows:
The Company, through a plan formalized in fiscal year 1998 and
completed in 1999, closed all unprofitable restaurants. The
Company plans to reopen new restaurants under new management with
more emphasis on a "casual fast food/self-service" theme. During
39
1999, after a period of reconstruction and reorganization, the
Company opened New York Floridino's and Lakeland. The Express and
Del Ray restaurants were opened in January 2000.
During the year ended December 31, 1999, the Company raised
approximately $2.1 million through a Regulation D 505 offering,
the exercise of common stock warrants, and a convertible
debenture offering. These funds were used to satisfy some of the
Company's long-term debt, reconstruct and improve current
restaurant space, and to complete the construction of
Specialties, its food manufacturing plant, and purchase of real
estate and investments.
The eventual outcome of the success of management's plans cannot
be ascertained with any degree of certainty. The accompanying
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Note 3-Closed Restaurants
Through December 31, 1999, the Company had completed its plans to
close the operations of unprofitable restaurants. The costs
associated with these closings are reported in the caption "Cost
of Store Closing" in the statement of operations. The restaurants
that were closed by management through 1999 are as follows:
Floridino's Pizza Etc., Inc.
Hard Ball Cafe, Inc.
Floridino's Home of the Calzone, Inc
Floridino's of Bartow, Inc.
The costs included in cost of store closings include accrued
overhead costs during the period the restaurants were closed to
the public until the Company had left the property.
The costs associated with the closing of these restaurants are
$157,987 and $138,555 for fiscal years 1999 and 1998,
respectively.
Note 4-Litigation
The Company and its subsidiaries are defendants in various
lawsuits filed by various suppliers for services rendered. The
Company has accrued the amounts of the proposed settlements in
the accompanying consolidated financial statements, as well as
the amounts of potential outstanding claims disclosed by the
Company's outside counsel. Management believes that the eventual
40
disposition of these lawsuits will not have a material impact on
the consolidated financial statements.
Note 5-Commitments and Contingencies:
The Company is committed to various non-cancelable leases for
restaurant space. At December 31, 1999, total future minimum
lease payments under operating leases is as follows:
2000 $353,188
2001 338,024
2002 342,334
2003 335,544
2004 341,008
Thereafter 914,400
----------
Total future minimum lease payments $2,624,498
==========
Rent expense was $224,817 and $179,111 for fiscal years 1999
and1998, respectively.
The Company is the lessee of certain equipment accounted for as
capital leases in 1999. The assets and liabilities of the capital
leases are recorded at the lower of the present value of the
minimum lease payments or the fair value of the asset purchased.
The assets are being amortized over the term of the lease or the
estimated useful life of the asset, whichever is less.
Minimum future lease payments for capital leases as of December
31, 1999 is as follows:
2000 $ 45,706
2001 46,777
2002 46,777
2003 39,024
2004 12,420
--------
Total future minimum lease payments 190,704
Less amounts representing interest (63,146)
Present value of net minimum lease ---------
payments $ 127,558
=========
Interest rates on capitalized leases range from 17% to 27%
imputed based upon the lower of the Company's incremental
borrowing rate at the inception of the lease or the lessor's
implicit rate of return.
41
Note 6-Common Stock Transactions
During fiscal year ending December 31, 1999, the balance of
warrants outstanding from an offering completed in July 1997 were
exercised or expired. During the period, 558,000 warrants were
exercised resulting in proceeds to the Company of $346,500 and
the issuance of 558,000 shares of common stock. The balance of
the outstanding warrants (63,000) expired on March 31, 1999.
During the period, the Company extended the original warrant
expiration date to March 31, 1999 and the exercise price was
lowered from $1 to $.50.
In August 1999, the Company issued 140,000 shares in return for
services rendered by outside consultants. As a result, $90,000
was recorded as compensation expense for this transaction.
In July 1999, the Company completed a Regulation D 505 offering
resulting in net proceeds to the Company of $1,000,000 and the
issuance of 2,000,000 shares of common stock.
Note 7-Convertible Debentures
In the last quarter of fiscal year 1999, the Company received
proceeds of $750,000 by issuing convertible debentures. The
debentures mature in September 2001 and October 2001 and carry an
interest rate of 9%. The debentures are convertible into common
stock at a 40% discount, from the preceding five day average
market price of the stock at the date conversion. The holders of
the convertible debentures will receive an aggregate fair value
of $1,250,000 in common stock as opposed to $750,000 in aggregate
proceeds received by the Company at the date of conversion based
upon the market price of the stock at issuance. The excess of
$500,000 in aggregate proceeds to be paid to the holders of the
convertible debt is being amortized to interest expense over a
period of twelve months, when the debentures become convertible
into common stock. Total amortization of the debt recorded as
interest expense at December 31, 1999 is $111,111.
Note 8-Convertible Preferred Stock
As more fully discussed in Note 10, the Company issued 50,000
shares of preferred stock to the president of the Company in
exchange for real estate assets transferred to the Company. The
net fair market value of the real estate at the date of the
transaction was $250,000, as determined by management.
The preferred stock is convertible into 50,000 shares of common
stock beginning in May 2000.
42
Note 9-Long term debt
The following comprises long term debt as of December 31, 1999:
FLORIDINO'S INTERNATIONAL HOLDINGS INC.
Notes payable to an unrelated party at a rate of $64,114 of 9%
due May 21, 2000 and October 10, 2000 The loan is secured by a
building owned by the Company Monthly payments of $718.
Mortgages payable to a financial institution 500,000 at an
interest rate of 9% due in December 2002. The mortgages are
secured by the land and a building owned by the Company. Monthly
payments of $11,251 consisting of interest only.
Mortgage payable to an individual at an interest 84,000 rate of
9% secured by a building owned by the Company. The loan is due
January 2000. Monthly payment of interest only of $750. The loan
is currently being renegotiated.
Mortgage payable to an individual at an interest 126,801 rate of
10% secured by a building owned by the Company. The loan is due
in June 2007. Monthly payments of $2,023.
Mortgage payable to an individual at an interest 139,276 rate of
9% secured by the processing plant owned by the Company. The loan
is due in June 2007. Monthly payments of $1,773.
Unsecured note payable to a contractor at an 237,207 interest
rate of 8.25%. Balloon payment due October 2000.
Unsecured notes payable to entities controlled 258,020 by the
majority shareholder and chairman of the board at an interest
rate of 8.25%. Balloon payments are due in January 2000 and
October 2000.
Other notes payable due to individual suppliers 35,260 with no
stated interest rate
Total debt 1,444,678
Less current maturities 699,866
----------
Long term debt $ 744,812
==========
43
<PAGE>
A schedule of maturities of long term debt by fiscal year is as
follows:
Year Amount
2000 $ 699,866
2001 262,192
2002 286,934
2003 26,881
2004 29,861
Thereafter 138,944
---------
Total $1,444,678
==========
Note 10-Related Party Transactions
The Company is indebted to its majority shareholder and chairman
of the board for the cost of certain reconstruction of the New
York restaurant incurred during 1999. Unsecured promissory notes
payable of $258,020 to entities controlled by the chairman were
entered into on August 31, 1999 and carry an interest rate of
8.25%. The notes mature in fiscal year 2000 and are included
in the current portion of long term debt in the statement of
financial condition.
In May 1999, the Company assumed title to three properties and
their corresponding mortgages from the President of the Company.
The estimated fair market value of the net equity of the
properties at the date of the transaction was $250,000. The
President was issued 50,000 shares of non-participating preferred
stock in consideration for this transfer. The preferred stock is
convertible into common stock beginning in May 2000 and has no
liquidation preferences.
Note 11-Segments
The segments of the Company follow the same accounting policies
as the consolidated group. The following is a summary of the
Company's segment information for fiscal years 1999 and 1998:
44
1999 1998
Gross Sales
Restaurants $860,099 $1,669,271
Food processing 33,094 -
-------- -----------
Total gross sales $893,193 $1,669,271
Gross Profit
Restaurants $288,727 $636,326
Food processing (14,616) -
-------- -----------
Total gross profit $274,111 $636,326
Income (loss) from continuing operations
Restaurants ($531,581) ($434,562)
Food processing (515,488) -
Corporate (356,693) (63,899)
-------- -----------
Total from continuing
operations ($1,403,762) 498,461
Depreciation & amortization
Restaurants $170,586 $69,931
Food processing 47,666 -
Corporate 27,519 21,283
-------- -----------
Total depreciation &
amortization $245,771 $91,214
Interest expense
Restaurants $44,295 $19,509
Food processing 12,307 -
Corporate 122,429 9,813
-------- -----------
Total interest expense $179,031 $29,322
Total Assets
Restaurants $892,024 $566,368
Food processing 510,839 -
Corporate 1,963,514 74,830
---------- ------------
Total assets $3,366,377 $641,198
========== ===========
The following table provides the Company's geographic information
for gross sales and assets:
1999 1998
Gross sales- restaurants
New York $ 578,392 $ -
Florida 281,707 1,669,271
-------- -----------
Total gross sales $ 860,099 $1,669,271
Gross sales- processing
New York $ - $ -
Florida 33,094 -
--------- ----------
Total gross sales $ 33,094 $ -
Total Assets
New York $ 664,776 $ 349,729
Florida 2,701,601 291,469
--------- ----------
Total assets $ 3,366,377 $ 641,198
=========== ==========
The company does not have any customers who represent greater
than 10% or more of consolidated gross sales.
Note 12-Earnings Per Share
The Company applies SFAS No. 128, Earnings Per Share. In
accordance with SFAS No. 128, basic net income per share has been
computed based on the weighted average of common shares
outstanding during the fiscal year. The effects of convertible
debentures preferred stock, and common stock warrants have not
been included since their inclusion would be anti-dilutive.
Note 13-Income taxes
At December 31, 1999 and December 31, 1998, the Company had
$1,523,805 and $533,353 of net operating loss carry forwards
which expire in years 2005 and 2004. No portion of the net
operating loss carryforwards has been recognized as a deferred
46
<PAGE>
tax asset at December 31, 1999 and December 31, 1998. The
following is a reconciliation between net loss per the statement
of operations and taxable loss at December 31, 1999 and December
31, 1998:
1999 1998
Net loss ($1,094,146) ($519,187)
Allowance for unrealized
gain on investment (402,531) -
Allowance for timing
difference in
depreciation expense (27,128) (14,166)
------------ ----------
Taxable loss ($1,523,805) ($533,353)
Deferred tax asset $518,094 $181,340
Allowance for tax
recoverability (518,094) (181,340)
------------ ----------
Deferred tax asset
recognized $ - $ -
============ ==========
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 $518,094 $181,340
Adjustment to bring
To net realizable value (518,094) (181,340)
Net realizable value $0 $0
========== ========
47
The statutory federal tax rate of 34% was used to calculated
deferred tax assets.
Note 14-Subsequent events
In January 2000, the Company purchased 100% of the issued and
outstanding common stock of Triton Prestige Products Inc., a food
manufacturer located in Palm City, Florida, by issuing 50,000
shares of common stock. The combination was recorded as a
purchase and accordingly, the fair market value of the assets and
liabilities at the date of the transaction were recorded. The
difference between the net fair value of the assets received and
the fair value of the common stock issued at the date of the
transaction was recognized as goodwill.
Note 15-Year 2000 Statement
The Company has actively addressed the issues related to the date
change in year 2000. This is necessary because many computer
systems were programmed using only two digits to contain the year
in the date fields. On January 1, 2000, many of these programs
will fail to perform date calculations correctly and produce
erroneous results. This could temporarily prevent the Company
from processing business transactions. The Company began efforts
to address this issue in fiscal 1999. As of the date of this
report, the Company has experienced no disruption of business due
to the Year 2000 issue.
There are significant risks associated with the year 2000 issues.
Many of these risks such as those associated with electrical
power or telecommunications are outside the reasonable control of
the Company. Although the Company believes its remediation and
contingency planning efforts adequately identify and addressed
the year 2000 issues that are within the Company's reasonable
control, there can be no assurance that the Company's efforts
will be fully effective. Due to the significant risks, the
Company's management continues to monitor this very closely.
Note 16-Notes payable to banks
The Company is currently in default on $159,112 of equipment
loans to banks. The debt had matured in fiscal 1998 and 1999 and
is included in current liabilities under the caption, "Notes
payable to banks" in the financial statements. These notes
carried interest at the prime rate plus 2% and were secured by
equipment. The Company is currently negotiating with the bank to
settle this debt.
48
Note 17-Property and Equipment
The major categories of property and equipment at December 31,
1999 are as follows:
Land $ 320,000
Equipment 572,180
Leasehold improvements 942,519
Vehicles 17,232
Buildings 859,000
Furniture and fixtures 2,885
Total property and equipment 2,713,816
---------
Less accumulated depreciation (274,729)
Net property and equipment $2,439,087
==========
The category for equipment includes $127,558 in of equipment
acquired under capital lease agreements. The amount of
accumulated amortization of capital leases is included in
accumulated depreciation and was $17,678 for 1999. Depreciation
expense was $245,771 and $91,214 for the years ended 1999 and
1998, respectively. During 1999 the Company wrote off
approximately $55,000 of restaurant equipment associated with the
closed operations. The equipment was pledged as security for bank
loans (See Note 16) and is being held in storage until resolution
of such claims.
Note 17- Restatement
Subsequent to the issuance of the certified report for December
31, 1999, management determined that the accounting for the
convertible debentures and the amortization of the resultant debt
discount had been improperly accounted for. The correction of
this improper presentation affected the balance sheet, statement
of operations, earnings per share, 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.
49
As Restated As Reported
Convertible debentures $ 361,111 $ 516,667
Paid in Capital $ 2,736,513 $ 2,469,846
Accumulated deficit $(2,272,376) $(2,161,265)
Interest expense $ (179,031) $ (67,920)
Net loss $(1,094,146) $ (983,035)
Loss per share $(.18) $(.16)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company on January 17, 2000 dismissed the certified public
accounting firm, Infante, Lago and Company, as a result of the
departure of Jesus Lago, the partner overseeing the audit and
financial reporting of the Company. Mr. Lago has become a partner
of the certified public accounting firm of Berkovits and Company,
P.A., located in the State of Florida, and the Company has
elected to retain this firm for the purpose of conducting future
audits of the Company and for providing financial reports for the
Company.
The decision to dismiss Infante Lago and Company was based solely
on the departure of Mr. Lago from that firm and did not stem from
any disagreement between the Company and Infante Lago on any
matter of accounting principles, practices, financial statements,
disclosure or auditing practices or procedures. No such
disagreements existed between the Company and Infante Lago prior
to their dismissal.
The engagement of the accounting firm of Berkovits & Company has
commenced on January 17, 2000.
The Company on December 17, 1999 filed a Form 8-K reflecting this
change. The Form 8-K is incorporated by reference herein and
investors are directed to that filing for disclosure purposes.
Investors are further advised that the principal accountant's
report on the financial statements for either of the past two
years did not contain an adverse opinion or disclaimer of
opinion, or was modified as to uncertainty, audit scope, or
accounting principles. Additionally, the decision to change
accountants was approved by the board of directors of the
company.
50
<PAGE>
ITEM 10. 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.
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. Keeler was
hired by the Company in November 1999.
Michael Floridino, President, is the Founder of the Company. He
has been in the restaurant business nearly his entire life. At
51
<PAGE>
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.
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. Mr. Scott has served
on the board of directors since March 1999.
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 and has been a
member of the board since January 1999.
52
Each director is elected at the annual meeting of Stockholders
and each Director elected holds office until a successor has been
elected and qualified, or until his prior resignation, removal,
or death. The following sets forth the dates since which each
director has served: Nick Pirgousis: January 7, 1999; George
Pirgousis: January 7, 1999; Frank Dolney: January 7, 1999;
William Scott: March 10, 1999; Michael Floridino: June 1997.
To the best knowledge of management, during the past five years,
no present or former director or executive officer of the
Company:
(1) filed a petition under the federal bankruptcy laws or any
state insolvency law, nor had a receiver, fiscal agent or similar
officer appointed by a court for the business or present of such
a person, or any partnership in which he was a general partner at
or within two years before the time of such filing, or any
corporation or business association of which he was an executive
officer within two years before the time of such filing;
(2) was convicted in a criminal proceeding or named subject of a
pending criminal proceeding (excluding traffic violations and
other minor offenses);
(3) was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining him
form or otherwise limiting, the following activities:
(i) acting as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, associated person of any of the
foregoing, or as an investment advisor, underwriter, broker or
dealer in securities, or as an affiliated person, director of any
investment company, or engaging in or continuing any conduct or
practice in connection with such activity;
(ii) engaging in any type of business practice; or (iii) engaging
in any activity in connection with the purchase or sale of any
security or commodity or in connection with any violation of
federal or state securities laws or federal commodity laws;
(4) was the subject of any order, judgment, or decree, not
subsequently reversed, suspended, or vacated, of any federal or
state authority barring, suspending, or otherwise limiting for
more than 60 days the right of such person to engage in any
activity described above under this Item, or to be associated
with persons engaged in any such activity;
53
(5) was found by a court of competent jurisdiction in a civil
action or by the Securities and Exchange Commission to have
violated any federal or state securities law, and the judgment in
subsequently reversed, suspended, or vacate;
(6) was found by a court of competent jurisdiction in a civil
action or by the Commodity Futures Trading Commission to have
violated any federal commodities law, and the judgment in such
civil action or finding by the Commodity Futures Trading
Commission has not been subsequently reversed, suspended or
vacated.
The Company's Common Stock is registered pursuant to Section
12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in connection therewith, directors,
officers, and beneficial owners of more than 10% of the Company's
Common Stock are required to file on a timely basis certain
reports under Section 16 of the Exchange Act as to their
beneficial ownership of the Company's Common Stock.
Item 6. EXECUTIVE COMPENSATION
The following table summarizes the total compensation awarded or
paid by the Company to its president, for the fiscal year ended
December 31, 1999. No other executive officer of the Company had
a total annual salary and bonus in excess of $100,000 for fiscal
1999. Accordingly, Floridino's President is the only named
officer of the Company under SEC rules.
Summary Compensation Table
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Sec. All Principal Annual Stock
Position Year Salary Bonus Compen. Award Options Options
Michael
Floridino
President 1999 $75,000 0 0 0 0
William
Keeler CEO 1999 $20,000 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.
54
The Company has not issued any shares of its common or preferred
stock to any employee. It has issued shares to The Ephraim Group
and to William Scott as consultancy services rendered to the
Company.
COMPENSATION TABLE: None
CASH COMPENSATION
There was no cash compensation paid to any director or executive
officer of the Company during the two fiscal years ended December
31, 1998 and 1999, with the exception of Michael Floridino who
received cash compensation in the sum of $75,000.00 in
conjunction with his position as president of the Company.
BONUSES AND DEFERRED COMPENSATION: None.
COMPENSATION PURSUANT TO PLANS: None.
PENSION TABLE: None.
OTHER COMPENSATION: None.
COMPENSATION OF DIRECTORS: None.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENT:
There are no compensatory plans or arrangements of any kind,
including payments to be received from the Company, with respect
to any person which would in any way result in payments to any
such person because of his or her resignation, retirement, or
other termination of such person's employment with the Company or
its subsidiaries, or any change in control of the Company, or a
change in the person's responsibilities following a change in
control of the Company.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth the information, to the best
knowledge of the Company as of December 31, 1999, with respect to
each person known by the Company to own beneficially more than 5%
of the Company's outstanding common stock, each director of the
Company and all directors and officers of the Company as a group.
The Company also provides beneficial ownership information
with respect to each of its executive officers.
55
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 13.06%
3560 Cypress Gardens Road
Winter Haven, Florida 33884
Hynford Holdings Ltd. 500,000 6.53%
Cable Beach Court - STE #1
Nassau, Bahamas
Toho Ventures Ltd.* 1,680,000 21.94%
494 LaGuardia Place
New York, New York 10012
George Pirgousis (3) 144,000 1.88%
494 LaGuardia Place
New York, New York 10012
William Scott 40,000 0.52%
95 Madison Avenue
Morristown, New Jersey
Lokee LLC* 142,000 1.85%
494 LaGuardia Place
New York, New York 10012
Raffles Toho Ltd.* 464,000 6.06%
494 La Guardia Place
New York, New York 10012
All Directors and Named
Executive Officers as
group 3,472,700 45.35%
PREFERRED SHARES
Michael Floridino 50,000 100.00%
3560 Cypress Gardens Road
Winter Haven, Florida 33884
*- see footnotes
56
(1) As of December 31, 1999, Nick Pirgousis and Frank Dolney each
own a fifty (50%) percent interest in Toho Ventures Ltd., which
holds 1,680,000 shares of the Company. The corresponding amount
of shares beneficially owned by Nick Pirgousis and Frank Dolney
each include the 840,000 shares of the Company they each
beneficially own through Toho Ventures Ltd.
(2) As of December 31, 1999, Nick Pirgousis was the sole
beneficial owner of Raffles Toho Ltd., which owns 464,000 shares
of the Company. The corresponding amount of shares beneficially
owned by Nick Pirgousis includes the 464,000 shares of the
Company owned beneficially through Raffles Toho Ltd.
(3) As of December 31, 1999, George Pirgousis was the sole
beneficial owner of Lokee LLC which owns 142,000 shares of the
Company. The corresponding amount of shares beneficially owned by
George Pirgousis includes the 142,000 shares of the Company owned
beneficially through Low Key Holdings.
Rule 13d-3(d)(1)(i) under the Securities Exchange Act of 1934,
regarding the determination of beneficial owners of securities,
includes as beneficial owners of securities, among others, any
person who directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has or
shares voting power and/or investment power with respect to such
securities; and, any person who has the right to acquire
beneficial ownership of such security within sixty days through a
means, including, but not limited to, the exercise of any
option, warrant, right or conversion of a security. Any
securities not outstanding that are subject to such options,
warrants, rights or conversion privileges shall be deemed to be
outstanding for the purpose of computing the percentage of
outstanding securities of the class owned by such person, but
shall not be deemed to be outstanding for the purpose of
computing the percentage of the class by any other person.
The Company has been advised that each of the persons listed
above has sole voting, investment, and dispositive power over the
share indicated above. Percent of Class (third column above) is
based on 7,657,000 shares of common stock outstanding as of the
date of this filing.
57
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) In May 1999, the Company issued 50,000 shares of convertible
preferred common stock to Michael Floridino, the Company's
president, in connection with the purchase of three (3) parcels
of real estate located at 1810 3rd Street, S.E., Winter Haven,
Florida, 300 Cypress Gardens Blvd, Winter Haven, Florida 33880,
3560 Cypress Gardens Road, Winter Haven, Florida 33884. For
additional consideration to Michael Floridino, the Company
assumed the liabilities and encumbrances on each of those
properties. The property provided by Michael Floridino was the
fair market value in accordance with inquiries and appraisals
made by the Company through various real estate brokers in the
Winter Haven, Florida area. The total market value of the three
properties, not reduced by mortgages, liens and encumbrances, was
approximately $639,000. The valuation of the liabilities on the
properties was $440,000.
(b) During the course of the year to August 31, 1999, the Company
received funding for reconstruction of the Company's operations
from Raffles Toho Inc., the total sum of approximately $258,020.
Raffles Toho is wholly owned by the Chairman of the Board of
Directors of the Company, Nick Pirgousis. The advance of such
funds is evidenced by three Promissory Notes. The terms of the
notes provide for interest to be assessed at an annual rate of
8.25%. The individual notes held by Raffles Toho, issued on
August 31, 1999, are for $120,435.00 and $72,197.00. These have a
balloon payment due on September 1, 2000 and have been extended
to October 31, 2000. A third individual note issued on August 31,
1999 for $65,388.00 possesses a balloon payment due on January 1,
2000.
INDEBTEDNESS OF MANAGEMENT:
(a) In May, 1999, the Company issued 50,000 shares of preferred
restricted common stock to Michael Floridino, the Company's
president, in connection with the purchase of three (3) parcels
of real estate located at 1810 3rd Street, S.E., Winter Haven,
Florida, 300 Cypress Gardens Blvd, Winter Haven, Florida
33880, 3560 Cypress Gardens Road, Winter Haven, Florida 33884.
For additional consideration to Michael Floridino, the Company
assumed the liabilities and encumbrances on each of those
properties. The property provided by Michael Floridino was the
Fair Market Value in accordance with inquiries and appraisals
made by the Company through various real estate brokers in the
Winter Haven, Florida area. The total market value of the three
properties, not reduced by mortgages, liens and encumbrances, was
approximately $639,000.
58
(b) During the course of the year to August 31, 1999, the Company
received funding for reconstruction of the Company's operations
from Raffles Toho Inc., the total sum of approximately $258,020.
Raffles Toho is wholly owned by the Chairman of the Board of
Directors of the Company, Nick Pirgousis. The advance of such
funds is evidenced by three Promissory Notes. The terms of the
notes provide for interest to be assessed at an annual rate of
8.25%. The individual notes held by Raffles Toho, issued on
August 31, 1999, are for $120,435.00 and $72,197.00. These have a
balloon payment due on September 1, 2000 and have been extended
to October 31, 2000. A third individual note issued on August 31,
1999 for $65,388.00 possesses a balloon payment due on January 1,
2000.
<PAGE>
PART IV
Item 14. FINANCIAL STATEMENTS, EXHIBITS AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS
The Following financial statements are filed as part of this
registration statement:
Balance Sheet
Statement of Loss
Statement of Cash Flows
Statement of Shareholders' Equity (Deficit)
Selected Financial Data
(B) EXHIBITS AND INDEX OF EXHIBITS
The following exhibits are included in Item 13(c). Other
exhibits have been omitted since the required information is not
applicable to the registrant.
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
Raffles Toho Inc.
10.5 Promissory Note Between Floridino's Inc. and
Toho Partners, LLC
10.6 Promissory Note Between Floridino's Inc. and
Toho Partners, Inc.
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.
60
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 21, 2000
By: /s/ Nick Pirgousis
------------------------
Chairman of the Board
61
<PAGE>
EX-27
[ARTICLE] 5
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1999
[PERIOD-START] JAN-01-1999
[PERIOD-END] DEC-31-1999
[CASH] 359,449
[SECURITIES] 471,250
[RECEIVABLES] 0
[ALLOWANCES] 0
[INVENTORY] 52,354
[CURRENT-ASSETS] 883,053
[PP&E] 2,713,816
[DEPRECIATION] (274,729)
[TOTAL-ASSETS] 3,366,317
[CURRENT-LIABILITIES] 1,432,771
[BONDS] 1,367,368
[COMMON] 7,657
[PREFERRED-MANDATORY] 0
[PREFERRED] 250,000
[OTHER-SE] 464,137
[TOTAL-LIABILITY-AND-EQUITY] 3,366,317
[SALES] 858,052
[TOTAL-REVENUES] 893,193
[CGS] 619,082
[TOTAL-COSTS] 1,677,873
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 179,031
[INCOME-PRETAX] (1,094,146)
[INCOME-TAX] 0
[INCOME-CONTINUING] (1,403,762)
[DISCONTINUED] 0
[EXTRAORDINARY] 78,533
[CHANGES] 0
[NET-INCOME] (1,094,146)
[EPS-DILUTED] (.18)
