UNITED STATES SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
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[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 2000
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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 (863) 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
As of June 30, 2000, there were 7,245,000the following shares of the
Registrant's common stock issued and outstanding:
1
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
FLORIDINO'S INTERNATIONAL HOLDINGS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2000 AND DECEMBER 31, 1999
As restated
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<TABLE>
<CAPTION>
As of
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June 30, 2000 December 31, 1999
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<S> <C> <C>
ASSETS
Current assets:
Cash $ 3,273 $ 359,449
Accounts receivable 51,171 0
Investment in marketable
securities 392,869 471,250
Inventory 111,516 52,354
----------- -----------
Total Current Assets 558,829 883,053
Property and equipment:
Buildings & equipment 1,392,074 1,451,297
Leasehold improvements 976,248 942,519
Less accumulated
depreciation (344,673) (274,729)
Land 320,000 320,000
Other assets 40,476 42,547
Goodwill (net of amortization) 335,802 0
Organization costs (net of amortization) 0 1,690
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Total Assets $ 3,278,756 $ 3,366,377
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LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 645,518 $ 490,924
Accrued expenses 146,122 61,200
Notes payable to banks 0 159,112
Current portion of
capital lease obligations 24,670 21,669
Current portion of
long term debt 703,338 699,866
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Total Current Liabilities 1,519,648 1,432,771
Long term debt:
Capital lease obligations 166,183 105,889
Long term notes and mortgages 521,638 744,812
Convertible promissory note 611,111 361,111
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Total Liabilities 2,818,580 2,644,583
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Stockholders' Equity:
Common stock, $.001 par value;
authorized 25,000,000 shares,
issued, and outstanding 7,245,000
(including 512,000
shares of treasury stock) at
June 30, 2000 and 7,707,000
at December 31, 1999 7,757 7,707
Additional paid in capital 3,468,359 3,068,409
Accumulated deficit (3,015,940) (2,354,322)
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Total stockholders' equity $ 460,176 $ 721,794
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Total Liabilities & Stockholders' Equity $ 3,278,756 $ 3,366,377
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</TABLE>
Please see the accompanying notes to the financial statements.
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FLORIDINO'S INTERNATIONAL HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX AND THREE MONTHS
ENDED JUNE 30, 2000 AND JUNE 30, 1999
As restated
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<TABLE>
<CAPTION>
Six Months Six months Three months Three months
6/30/00 6/30/99 6/30/00 6/30/99
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<S> <C> <C> <C> <C>
Revenues:
Food and beverage sales $ 1,040,274 $ 546,261 $ 522,276 $ 179,048
Franchise fee revenue 25,438 41,844 10,222 26,655
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Total gross sales 1,065,712 588,105 532,498 205,703
Less cost of goods sold (719,501) (353,616) (352,038) (128,880)
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Gross profit 346,211 234,489 180,460 76,823
Operating expenses:
Selling, general, and
administrative expenses (1,198 (855,958) (693,241) (417,304)
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Net loss from operations (851,850) (621,469) (512,781) (340,481)
Other income (expense):
Unrealized gain on
investment 60,252 57,596 (64,248) 57,596
Realized gain on invest 562,399 0 419,873 0
Loss on sale of assets (90,236) 0 0 0
Interest expense (342,183) (11,072) (170,337) (4,397)
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Loss from operations before
income tax provision (661,618) (574,945) (327,493) (287,282)
Income tax provision 0 0 0 0
------------------------------------------------------------------------
Net loss ($ 661,618) ($ 574,945) ($ 327,493) ($ 287,282)
========================================================================
Net loss per common share:
Basic:
Net loss per share $ (.09) ($ (.11) $ (.05) $ (.05)
Weighted average of common shares:
Basic 7,325,994 5,310,717 7,245,000 5,322,766
</TABLE>
Please see the accompanying notes to the financial statements.
4
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999
As restated
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<TABLE>
<CAPTION>
As of As of
June 30, 2000 June 30, 1999
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<S> <C> <C>
Operating Activities:
Net loss ($661,618) ($574,945)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 324,960 94,182
Unrealized gain on short term investment (60,252) (57,596)
Loss on disposal of real estate assets 90,236 0
Changes in assets and liabilities:
Accounts receivable (51,171) (12,929)
Inventory (59,162) (3,453)
Short term investments 138,633 (98,500)
Other assets 3,761 (36,228)
Accounts payable 121,624 122,817
Accrued expenses 84,922 (60,288)
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Net cash used by operations (68,067) (626,940)
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Investing Activities:
Sale of real estate assets 409,764 0
Purchase of equipment (335,617) (35,353)
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Net cash (used) provided by
investing activities 74,147 (35,353)
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Financing Activities:
Proceeds from issuance of common stock 20,233 689,036
Loan payable to stockholder 0 (152,799)
Payment of bank loan (159,112) 0
Payment of capital leases (3,675) 0
Change of long term debt (219,702) 424,248
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Net cash (used) provided
by financing activities (362,256) 960,485
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Net change in cash during the period (356,176) 298,192
5
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Cash balance at beginning of fiscal year 359,449 15,502
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Cash balance at end of the period $ 3,273 $313,694
======== ========
Supplemental disclosures:
Interest paid during the period $ 58,433 $ 10,777
Income taxes paid during the period $ 0 $ 0
</TABLE>
Please see the accompanying notes to the financial statements.
6
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY
FOR THE PERIOD JANUARY 1, 2000 TO JUNE 30, 2000
<TABLE>
<CAPTION>
Common Stock Paid in Accumulated
Shares Amount Capital Deficit Total
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<S> <C> <C> <C> <C> <C>
Balance at
1/1/00 7,707,000 $ 7,707 $3,068,409 $(2,354,322) $ 721,794
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Issuance of
common stock
to purchase
subsidiary 50,000 50 399,950 400,000
Return of stock
To treasury (512,000)
Net loss during
the period (661,618) (661,618)
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Balance at
6/30/00 7,245,000 $ 7,757 $ 3,468,359 $(3,015,940) $ (460,176)
=============================================================================================
</TABLE>
Please see the accompanying notes to the financial statements.
7
<PAGE>
FLORIDINO'S INTERNATIONAL HOLDINGS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1- Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included. The
results of operations for the six months ended June 30, 2000 are not necessarily
indicative of the results to be expected for the full fiscal year. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Annual Report of Floridino's International Holdings,
Inc. and subsidiaries (the "Company") on Form 10-KSB/A for the year ended
December 31, 1999.
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Significant inter-company balances and transactions have been
eliminated in consolidation.
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.
Note 2- Earnings Per Share
The Company applies SFAS No. 128, Earnings Per Share. In accordance with SFAS
No. 128, basic net loss per share has been computed based on the weighted
average of common shares outstanding during the period. The effects of
convertible promissory note have not been included since its inclusion would be
anti-dilutive. However, if the promissory note was debentures were converted
into common shares, the Company would issue 142,761 shares of common stock in
satisfaction of the promissory note.
Note 3- Common Stock Transactions
During the period, the Company issued 50,000 shares of common stock to purchase
100% of the issued and outstanding common stock of Triton Prestige Products,
Inc., a privately held company specializing in Italian food processing. See Note
4 for further discussion.
In addition, during the quarter, an officer of the Company returned an
additional 12,000 of common stock to the treasury at no cost to the Company for
a total of 512,000 shares of common stock for the year to date returned to
treasury at no cost to the Company.
Note 4- Purchase of Triton Prestige Products Inc.
8
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In February 2000, the Company issued 50,000 shares of common stock to purchase
100% of the issued and outstanding common stock of Triton Prestige Products,
Inc., a privately held company specializing in Italian food processing. Triton
became a wholly owned subsidiary of the Company and its results of operations
are included in the frozen food segment. The purchase method of accounting was
used to record the transaction and accordingly, the fair market value of the
assets acquired and the liabilities assumed at the date of the transaction are
recorded in the books and records of the Company. The difference between the
fair market value of the shares given and the fair market value of the net
assets acquired is recognized as goodwill. Goodwill resulting from the
transaction is being amortized over a period of twenty years.
The calculation of goodwill at the date of the transaction is as follows:
Fair value of stock transferred
(50,000 at $8 per share) $400,000
Less cash balance acquired (20,233)
Less fair value of assets acquire (196,011)
Add fair value of liabilities assumed 157,062
--------
Goodwill $340,818
========
Amortization of goodwill for the period is $5,016.
The consolidated pro-forma comparative results of operations of the Company for
the six months ended June 30, 2000 and June 30, 1999 is as follows:
2000 1999
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Sales revenues $1,085,146 $ 571,277
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Net loss $ (644,974) $(569,756)
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Net loss per share $ (.09) $ (.11)
========== =========
9
<PAGE>
Note 5- Addendum to Consolidated Statement of Cash Flows
Certain non-cash transactions are not reflected in the consolidated statement of
cash flows for the period. These include the following:
The issuance of common stock in the Triton purchase valued at $379,767 in
exchange for $196,011 of fixed assets, $66,970 of capital lease obligations,
$57,387 accounts payable, $32,970 of long term debt, and $340,818 of goodwill.
The Company acquired a cash balance of $20,233 in the transaction.
Note 6- Segment Information
The Company's business operations are divided into two segments: (1) restaurants
(including franchising activities) and (2) frozen foods. The Company's business
segments are based on business units or entities that offer different products.
The restaurant segment includes the results of operations of Floridino's, Inc.
located in lower Manhattan, New York City, New York, Lakeland located in
Lakeland, Florida, and Delray located in Delray Beach, Florida. Frozen foods
includes the results of operations of Specialties located in Lakeland, Florida
and Triton Prestige located in Palm City, Florida.
The following is a summary of the Company's segment information for the six and
three months ended June 30, 2000 and June 30, 1999.
Corporate includes the transactions of the Floridino's International Holdings,
Inc., the parent company, and Toho Holdings, Inc. organized in early 1999 to
hold title to the real estate assets of the Company. The expenses of the Company
not directly attributable to a specific segment are included in the corporate
segment.
10
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<TABLE>
<CAPTION>
Six months Six months Three months Three months
6/30/00 6/30/99 6/30/00 6/30/99
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Gross Sales
Restaurants $ 944,021 $ 588,105 $ 498,127 $ 205,703
Frozen foods 121,691 0 34,371 0
--------------------------------- ---------------------------------
Total gross sales $ 1,065,712 $ 588,105 $ 532,498 $ 205,703
================================= =================================
Gross Profit
Restaurants $ 335,259 $ 234,489 $ 177,570 $ 88,823
Frozen foods 10,952 0 2,890 0
--------------------------------- ---------------------------------
Total gross profit $ 346,211 $ 234,489 $ 180,460 $ 88,823
================================= =================================
Income from operations
Restaurants $ 34,116 ($ 203,164) $ 103,854 ($ 58,043)
Frozen foods (363,541) (254,802) (177,442) (138,725)
Corporate (522,425) (163,503) (439,193) (143,713)
--------------------------------- ---------------------------------
Total from operations ($ 851,850) ($ 621,469) ($ 512,781) ($ 340,481)
================================= =================================
Depreciation & amortization
Restaurants $ 44,557 $ 84,958 $ 15,624 $ 67,951
Frozen foods 11,741 0 1,626 0
Corporate 268,662 9,224 1,719 1,087
--------------------------------- ---------------------------------
Total $ 324,960 $ 94,182 $ 18,969 $ 69,038
================================= =================================
Interest expense
Restaurants $ 53,988 $ 7,953 $ 44,498 $ 3,043
Frozen foods 6,2 0 4,921 0
Corporate 281,967 3,119 120,918 1,354
--------------------------------- ---------------------------------
Total $ 342,183 $ 11,072 $ 170,337 $ 4,397
================================= =================================
Total Assets
Restaurants $ 1,195,015 $ 847,045
Frozen foods 1,132,568 0
Corporate 951,173 1,053,654
---------------------------------
Total assets $ 3,278,756 $ 1,900,699
=================================
</TABLE>
There are no differences in the reporting basis from the annual report on Form
10-KSB/A for December 31, 1999.
Note 7- Subsequent Event
In July 2000, management decided to close the restaurant located in Delray
Beach, Florida (the Delray restaurant) as they determined that initial
expectations for success had not been met.
11
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Note 8- Restatement and prior period adjustments
Subsequent to the filing of this Form 10-QSB, it was determined that the
accounting for the convertible promissory note and the amortization of the
resultant debt discount had not been properly reflected based on the then
current understanding of the transaction by management. This correction affected
the balance sheet, statement of operations, earnings per share, the statement of
cash flows and changes in stockholders' equity as originally reported.
In addition, the accounting for the operations of the closed restaurants had
been originally disclosed as discontinued operations. This original treatment
was correct based upon management's intention when the original financial
statements were prepared. Subsequent to year end, management decided to continue
their restaurant operations. The restated statement of operations properly
discloses the operations of the closed restaurants into their attendant
categories. The correction affected the balances of food and beverage sales,
cost of sales, and general administrative expenses.
In addition, the issuance of preferred stock to an officer in exchange for real
estate assets needed to be restated as an issuance of common stock because the
Company's articles of incorporation precluded an issuance of preferred stock.
The balances of common stock, preferred stock, and additional paid in capital
have been affected by the restatement.
The following table reflects the accounts that have been affected by these
corrections.
As Restated As Reported
Common stock $ 7,757 $ 7,707
Paid in Capital $ 3,468,359 $ 3,196,463
Preferred stock $ -0- $ 190,000
Accumulated deficit $ (3,015,940) $(2,933,994)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
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.
12
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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.
The goal of the Company's concept is to serve authentic Italian cuisine in a
fast food environment. This format incorporates express style restaurants with
customers being served at the counter for carry out or on premises dining. An
upscale ambiance is incorporated into the concept to provide for a casual dining
experience in a warm, relaxed setting.
The Company 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. As of June 30,
2000, the Company has four (4) franchise restaurants.
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. In
February 2000, the Company purchased Triton Prestige Products, Inc., which
operated an Italian food processing plant in Palm City, Florida. Triton
specializes in catering to school districts in the Southeast United States.
Management believes that the addition of Triton shall enable the Company to
expand its brands and products.
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." and Triton Presitge
Products, Inc., which are wholly owned subsidiaries of the Company.
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 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:
* Inability of the Company to secure additional financing
* Unexpected economic changes in the United States
* The imposition of new restrictions or regulations by government agencies
that affect the Company's restaurants and food processing activities.
13
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To the extent possible, the following discussion will highlight the relative
activities of the Company of both its restaurant segment and its frozen food
segment.
-Segment Reporting Disclosures
The Company's business operations are divided into two segments: (1) restaurants
(including franchising activities) and (2) frozen foods. The Company's business
segments are based on business units or entities that offer different products.
The restaurant segment includes the results of operations of Floridino's, Inc.,
located in lower Manhattan, New York City, New York, Lakeland located in
Lakeland, Florida, and Delray located in Delray Beach, Florida. Food processing
includes the results of operations of Specialties located in Winter Haven,
Florida and Triton Prestige located in Palm City, Florida. In July 2000,
management decided to close the restaurant located in Delray Beach, Florida (the
Delray restaurant) as they determined that initial expectations for success had
not been met.
Results of Operations
---------------------
It should be noted that the Company's auditors have expressed significant doubt
as to the Company's ability to continue to operate as a going concern (see
Annual Report on Form 10-KSB/A for the fiscal year ended December 31, 1999) due
to the significant losses that the Company has incurred in the last two fiscal
years. Management has addressed these concerns as outlined in such Annual
Report; 10-KSB/A for December 31, 1999. However, the future success of
management's plans implemented to address the going concern issue cannot be
reasonably assured. In fact, the Company continues to experience significant
losses through June 30, 2000.
Six months ended June 30, 2000 compared to the six months ended June 30, 1999:
Consolidated sales, gross profit, and net income:
During the six months of fiscal year 2000, the Company had combined gross sales
of $1,065,712, compared to $588,105 in the first six months of fiscal year 1999,
an increase of 81%. Consequently, gross profits reached $346,211 for the six
months ended June 30, 2000 as compared to $234,489 for the six months ended June
30, 1999, an increase of 48%. Gross profits as a percent of gross sales
decreased to 32% for the period as compared to 43% for the prior year. This
decrease is a result of the addition of the frozen food segment, which has a
lower profit margin than the restaurant segment. Management expects the
consolidated gross profit percentage to continue to decrease in the future, as
the frozen food segment becomes a larger part of the Company's overall business.
General and administrative expenses for the six months ended June 30, 2000
increased to $1,198,061 as compared to $855,958 for the six months ended June
30, 1999, an increase of 40%. Some of the material increases during this six
month period as compared to the prior year's first quarter are detailed as
follows:
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<PAGE>
* Insurance costs increased approximately $40,000
* Corporate travel costs increased approximately $32,000
* Corporate payroll costs increased approximately $50,000
* General advertising costs increased approximately $50,000
The majority of these increased costs are directly attributable to
implementation of management's plan outlined in the Annual Report on Form
10-KSB/A for the fiscal year ended December 31, 1999.
During 1999, new management was hired and the accounting staff increased in
order to meet management's goals. Travel costs increased as a result of the
increase in travel by corporate management located in New York and the
operations in Florida. Insurance costs increased as the number of employees
increased from 25 to 55 between June 1999 and June 2000.
The Company has recognized trading gains from its stock investments of $622,651
during the period. In addition, the Company sold two parcels of real estate
during the period with a book value of $500,000 for $409,764, and therefore
recognized a loss on the sale of $90,236. Interest expense increased
substantially from $11,072 in 1999 to $342,183 in year 2000. This increase is
mainly attributable to a $750,000 of convertible promissory note issued during
the latter part of fiscal 1999 and the recognition of $250,000 of debt discount
amortization to interest expense attributable to the convertible promissory
note. (See Annual Report on Form 10KSB/A for the fiscal year ended December 31,
1999).
Net loss for the six months ended June 30, 2000 increased to $661,618 compared
to a loss of $574,945 for the six month period in 1999, an increase in the loss
of approximately 10%. On a per share basis, basic loss per share decreased to
$.09 at June 30, 2000 compared to an $.11 loss per share at June 30, 1999.
Restaurants:
Gross sales from the Company's restaurants and franchise segment increased to
$944,021 in the first six months of fiscal 2000 from $588,105 in the same period
in fiscal 1999, or an increase of 60%. Consequently gross profits increased to
$335,259 or 43%. Gross profits as a percentage of gross sales decreased to 36%
in the six month period of fiscal 2000 from 40% in the same period in fiscal
1999. Management attributes the decrease to the efforts to change the restaurant
segment's theme from a more conventional style of restaurant to a fast, self
service style of restaurant. The latter type of restaurant historically will
have lower margins and lower operating costs as compared to the conventional
style restaurant. The decrease was not as a result of lower prices on food
products sold.
Depreciation costs decreased significantly for the period, from $84,958 in
fiscal 1999 to $44,557 in fiscal 2000. As expected, depreciation costs decreased
because of the restaurant closings and the
15
<PAGE>
transfer of much of the old restaurant equipment out of production.
Interest costs increased from $7,953 to $53,988 for the six month period
comparing fiscal 1999 to fiscal 2000. The increase in interest costs is due to
the $495,000 in notes payable used to finance the reconstruction of the New York
restaurant. Interest on the debt is at 8.25%.
The restaurant segment had net operating income of $34,116 for the six months
ended June 30, 2000 as compared to a loss of $203,164 for the six months ended
June 30, 1999. This significant achievement that is attributable to the
implementation of management's plan to close all the unprofitable restaurants
during fiscal year 1999 and to reopen new restaurants under a fast casual self
service theme.
The Company currently operates four restaurants. It should be noted that the
segment's success is directly attributable to the results of operations of
Floridino's, Inc. (New York). The New York restaurant is located in lower
Manhattan in New York City, New York. The restaurant was acquired in November
1998 and was closed for reconstruction in August 1999. The popularity of the
restaurant has grown significantly. The gross sales of the New York restaurant
accounts for approximately 70% of the segment and its net profit from operations
through the six months ended June 30, 2000 is approximately $84,000. In fact, if
not for the New York restaurant, the segment would have shown a slight operating
loss for the period.
The operations of the restaurant segment include the results of the Floridino's,
Inc., Lakeland, and the Delray restaurants for the entire period. The Lake Wales
restaurant opened in late May 2000.
The Company has no plans to open any additional restaurants in the foreseeable
future. However, should a favorable opportunity arise, the Company may open
additional restaurants according to its new self-service fast Italian theme.
During the period, the Company added no other franchisee. Revenues from
franchise fees have decreased from the six month period ended June 30, 1999
compared to the six month period ended June 30, 2000. Management intends to
aggressively pursue its new self service casual franchise concept in the future
because it is an avenue to enhance the Company's name and brands and is expected
to lead to more business for its frozen food division. The franchise concept
generally requires no initial capital expenditures on the part of the Company
and is therefore a more attractive area to pursue given the Company's current
financial condition.
The assets for the restaurant segment have increased by approximately $348,000
at June 30, 2000 to $1,195,005 as compared to $847,045 at June 30, 1999. The
main cause of this increase were the capitalized construction costs of the New
York and Lakeland restaurants. The restaurants had been closed in August and
October of 1999, respectively, for reconstruction and were reopened in the
fourth quarter of fiscal 1999. The restaurant equipment of the closed
restaurants is still being stored at the plant and has a book value of
approximately $55,000.
Frozen Foods:
16
<PAGE>
The frozen foods segment finally became operational during the period after
nearly a year of investing and planning. The Company's food processing plants in
Lakeland Florida and Palm City, Florida generated sales of approximately
$122,000. Management is not satisfied with these results. Initial production
problems caused scheduling changes and delivery delays. This has caused a lower
than anticipated frozen food orders from our customers. Management has evaluated
the situation and believes that the plants must become more automated to meet
the significant demand that will be experienced if the Company can instill
confidence in meeting orders on a timely basis.
Management will continue to monitor the situation through the next quarter and
provide and a business plan to automate the plants in the most effective
manner.
Gross profits are at 9% of gross sales, or approximately $11,000 for the period.
As expected by management, the frozen food segment emphasizes a higher volume of
sales but earns lower profit margins. Buyers of the Company's processed food
products are fast food entities, large restaurants, school districts, and other
food chains located in the southeast United States.
The frozen food segment showed a loss for the period $363,541 compared to a loss
of $254,802 for the same period in fiscal 1999last year.. The plant is currently
operating at about 15% capacity. Plant overhead costs average about $60,000 per
month. The plant is currently operating at a very low capacity, and therefore,
overhead costs remain high per unit of production. Management expects no
significant additional expenditures to be needed in order to meet the expected
demand for its
products. Therefore, the plants are currently operating at 10% of capacity and
can undergo a significant increase in volume without the attendant increase in
overhead costs.
Three months ended June 30, 2000 compared to the three months ended June 30,
1999:
Consolidated sales, gross profit, and net income:
During the three month period ended June 30,Q2 2000, the Company had combined
gross sales of $532,498, compared to $205,703 for the same period ended June 30,
1999Q2 1999, an increase of 127%. Consequently, gross profits reached $180,460
for the periodQ2 2000 as compared to $76,823 for the same periodQ2 ended June
30, 1999, an increase of 129%. Gross profits as a percent of gross sales
decreased to 34% for the period as compared to 38% for the prior year. This
decrease is a result of the addition of the frozen food segment, which has a
lower profit margin than the restaurant segment. Management expects the
consolidated gross profit percentage to continue to decrease in the future, as
the frozen food segment becomes a larger part of the Company's overall business.
Overhead expenses for the quarter increased to $512,781 as compared with
$340,348 incurred in the same period in fiscalQ2 1999. Some of the material
increases are due to the following increases:
* Insurance costs increased approximately $40,000
* Corporate travel costs increased approximately $32,000
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* Corporate payroll costs increased approximately $50,000
The majority of these increased costs are directly attributable to
implementation of management's plan outlined in the Annual Report on Form
10-KSB/A for the fiscal year ended December 31, 1999.
During 1999, new management was hired and the accounting staff increased in
order to meet management's goals. Travel costs increased as a result of the
increase in travel by corporate management located in New York and the
operations in Florida. Insurance costs increased as the number of employees
increased from 25 to 55 between June 1999 and June 2000.
The Company has recognized trading gains from its stock investments of $355,625
during the period. After deducting interest costs of $170, 337, the Company
recognized net loss for the quarter of $327,493, or $.05 per share, as compared
with $287,282 or $.05 per share, in the same period in fiscalQ2 1999.
Interest costs increased substantially in the three month period ended June
30,Q2 2000 compared to the same period in fiscal 1999. This increase is mainly
attributable to $750,000 of a convertible promissory note issued during the
latter part of fiscal 1999 and the recognition of $250,000 of debt discount
amortization to interest expense attributable to the promissory note. (See
Annual Report on Form 10KSB/A for the fiscal year ended December 31, 1999).
Restaurants:
Gross sales from the Company's restaurants and franchise segment increased to
$498,127 in the three months ended June 30,Q2 2000 from $205,703 in the same
period in fiscal1999, or an increase of 142%. Consequently gross profits
increased to $177,570 or 131%. Gross profits as a percentage of gross sales
decreased to 36% in 2000 from 37% in 1999 mainly as a result of higher
depreciation costs associated with the significant reconstruction costs
capitalized in the latter part of fiscal 1999. The decrease was not as a result
of lower prices on food products sold.
The restaurant segment has net operating income of $103,854 for the quarter
ended June 30, 2000 as compared to a loss of $58,043 for the quarter ended June
30, 1999. This is a significant achievement that is attributable to the
implementation of management's plan to close all the unprofitable restaurants
during fiscal year 1999 and to reopen new restaurants under a fast casual self
service theme.
The Company currently operates four restaurants. It should be noted that the
segment's success is directly attributable to the results of operations of
Floridino's, Inc. (New York). The New York restaurant is located in lower
Manhattan in New York City, New York. The restaurant was acquired in November
1998 and was closed for reconstruction in August 1999 and reopened a short time
thereafter. The popularity of the restaurant has grown significantly.
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The operations of the restaurant segment include the results of the Floridino's,
Inc., Lakeland, and the Delray restaurants for the entire period. The Lake Wales
restaurant opened in late May 2000. The Delray restaurant was closed in July
2000 because management felt that the restaurant had not met its initial
expectations for success. For the six month period ended June 30, 2000, this
restaurant had gross sales of $74,920 and incurred operating losses of $114,706.
The Company has no plans to open any additional restaurants in the foreseeable
future. However, should a favorable opportunity arise, the Company may open
additional restaurants according to its new self-service fast Italian theme.
During the period, the Company added no other franchisee.
Frozen Foods:
Gross sales of frozen food products were $34,371 for the quarter ended June
30,fro Q2 2000. This is a decrease from $87,320 in the first quarter of fiscal
2000, the initial quarter of operations. Gross profits for the quarter were
$2,890 or approximately 9% of gross sales. After deducting overhead costs for
the quarter, the segment showed an operating loss of $177,442 as compared to
$138,725 in the similar period last year. As discussed above, management is
closely monitoring the reasons for this poor performance and expects to make a
decision on this segment within the coming quarter.
Discussion of Financial Condition- Liquidity and Capital Resources
At June 30, 2000, the Company had a working capital deficit of $960,819 as
compared to a working capital deficit of $549,718 at December 31, 1999. On a
consolidated basis at June 30, 2000, cash on hand was $3,273 as compared to
$359,449 at December 31, 1999. Cash of approximately $29,000 was provided by
operations. The Company sold two buildings in January 2000 for approximately
$410,000 and purchased approximately $375,000 in plant and restaurant equipment
during the period with the proceeds from the building sales. Approximately
$20,000 in cash was acquired in the purchase of Triton Prestige Products, Inc.
In February 2000. The Company used approximately $159,000 in cash to settle
outstanding bank loans on the closed restaurants. In addition, the Company used
approximately $223,000 to settle outstanding long- term debt to individuals
incurred as a result of the plant and restaurant acquisitions in prior fiscal
years.
Accounts payable and accrued expenses increased to approximately $791,000 at
June 30, 2000 as compared to approximately $552,000 at December 31, 1999. The
increases are the result of the current liabilities acquired in the acquisition
of Triton Prestige Products.
In February 2000, the Company issued 50,000 shares of common stock to purchase
100% of the issued and outstanding common stock of Triton Prestige Products,
Inc., a privately held company specializing in Italian food processing. Triton
became a wholly owned subsidiary of the Company and its results of operations
are included in the frozen food segment. The purchase method of accounting was
used to record the transaction and accordingly, the fair market value of the
assets acquired and the liabilities assumed at the date of the transaction are
recorded in the books and records of the Company. The difference between the
fair market value of the shares given and the
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fair market value net assets acquired is recognized as goodwill. Goodwill of
$340,818 is being amortized over a period of twenty years.
The calculation of goodwill at the date of the transaction is as follows:
Fair value of stock transferred
(50,000 at $8 per share) $ 400,000
Less cash balance acquired ( 20,233)
Less fair value of assets acquired (196,011)
Add fair value of liabilities assumed 157,062
-----------
Goodwill $ 340,818
===========
Total assets at June 30, 2000 decreased to $3,278,756 from $3,366,377 at
December 31, 1999.
The majority of the current portion of long-term debt represents $258,020 owed
to the Chairman of the Board for construction costs reimbursements due for the
New York restaurant and $237,207 due to a general contractor for the
reconstruction of the New York restaurant. Both of these loans are unsecured.
The majority of long-term debt is a $500,000 loan obtained in late 1999 from a
financing company which matures in fiscal year 2002 and 2003. The Company's
plant assets secure these loans.
The Company's total stockholders' equity decreased from $721,794 at December 31,
1999 to $460,176 at June 30, 2000. The decrease is the result of the combination
of approximately $662,000 in net losses and the increase of $400,000 resulting
from the acquisition of Triton.
During the balance of fiscal year 2000, the Company projects no significant
additional capital expenditures in connection with any of the Company's
restaurant or frozen food activities.
Management expects to fund its operations from current cash and investment
balances of approximately $396,000. Given the current cost structure of the
Company, there is a strong possibility that the Company may not be able to meet
is overhead costs beyond the next fiscal year end. If the frozen food processing
plant cannot generate sufficient revenues to offset its production overhead
within the coming months, management plans to completely restructure or dispose
of the segment.
The self-service fast casual restaurant concept envisioned by management's plans
discussed more fully in the Annual Report on Form 10-KSB/A for the fiscal
year ended December 31, 1999 has been implemented. The Lake Wales restaurant
is expected to be opened for business in late May 2000. After Lake Wales, no
additional restaurants are planned to open during fiscal 2000. However, the
Company will endeavor to take advantage of favorable opportunities as they
present themselves.
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Instead, the Company intends to emphasize its new self-service fast casual
concept as a franchise. The Company intends to support and train new franchisees
for a fixed fee and a percentage of gross revenues. The intention is to generate
franchise fee revenues and additional demand for its frozen food products, but
without the significant investment needed to open and operate a restaurant.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are currently no pending legal proceedings against the Company.
Item 2. Changes in Securities
The instruments defining the rights of the holders of any class of registered
securities have not been modified.
Item 3. Defaults upon Senior Securities
There has been no default in the payment of principal, interest, sinking or
purchase fund installment.
Item 4. Submission of Matters to a Vote of Security Holders
No matter has been submitted to a vote of security holders during the period
covered by this report.
Item 5. Other information
There is no other information to report which is material to the Company's
financial condition not previously reported.
Item 6. Exhibits and Reports on Form 8-K
There are no exhibits attached and no reports on Form 8-K were filed during the
quarter for which this report is filed.
Exhibit 27 Financial Data Schedule
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
FLORIDINO'S INTERNATIONAL HOLDINGS, INC.
-------------------------
(Registrant)
Date: December 29, 2000
By: /s/ Nick Pirgousis
---------------------
CHAIRMAN OF THE BOARD
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