THIS DOCUMENT IS A COPY OF THE FORM 10-QSB FILED ON NOVEMBER 15, 1999
PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1999
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______________ to _______________
Commission file number __________________________________________
Contessa Corporation
---------------------------------------
(Exact name of small business issuer as
specified in its charter)
Delaware 65-0656268
--------------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2700 West Cypress Creek Rd., Ft. Lauderdale, FL 33309
----------------------------------------------------------------------
(Address of principal executive offices)
(954) 973-7779
------------------------------------------
(Issuer's telephone number)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 |_| No |X|
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date: 2,866,506
Transitional Small Business Disclosure Format (check one).
Yes |_| No |X|
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial reporting and pursuant to the rules and regulations of the Securities
and Exchange Commission. While these statements reflect all normal recurring
adjustments which are, in the opinion of management, necessary for fair
presentation of the results of the interim period, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. For further information, refer to
the financial statements and footnotes thereto included in the Company's annual
report filed on Form 10-KSB for the fiscal year ended December 31, 1998.
CONTESSA CORPORATION
(a development stage company)
BALANCE SHEET
<TABLE>
<CAPTION>
September 30,
December 31, 1999
1998 Unaudited
--------- ---------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $4,318 $7,889
--------- ---------
Total current assets 4,318 7,889
Capital assets 132,148 132,148
Other assets
Excess of purchase paid over book values 196,644 196,644
Security deposits 10,533 10,533
--------- ---------
Total other assets 207,177 207,177
--------- ---------
Total assets $343,643 $347,214
========= =========
Liability and Stockholders' Equity
Current liabilities
Loans payable related party $127,432 $176,656
Loan payable 10,150
--------- ---------
Total liabilities 127,432 186,806
Stockholders equity
Common stock-$.0001 par value, authorized
5,000,000 shares. The number of shares
outstanding at December 31, 1998 and
September 30, 1999 was 2,866,506 and 2,866,506
respectively 287 287
Additional paid in capital 507,450 507,450
Accumulated deficit during development stage (291,526) (347,329)
--------- ---------
Total stockholders equity 216,211 160,408
--------- ---------
Total liabilities and stockholders equity $343,643 $347,214
========= =========
</TABLE>
1
<PAGE>
CONTESSA CORPORATION
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
Unaudited
<TABLE>
<CAPTION>
For the period
For the nine For the nine from inception
months ended months ended March 7, 1996 to
September 30, September 30, September 30,
1998 1999 1999
------------- ------------- ----------------
<S> <C> <C> <C>
Income $ -0- $ -0- $ -0-
Costs of goods sold - -0- -0- -0-
---------- ---------- ----------
Gross profit -0- -0- -0-
Operations:
General and 64,550 55,803 347,329
administration
Depreciation and
amortization -0- -0- -0-
---------- ---------- ----------
Total expense 64,550 55,803 347,329
Net Profit (Loss)
from operations $ (64,550) $ (55,803) $ (347,329)
========== ========== ==========
Net income per
share-basic $ (.02) $ (.02) $ (.12)
========== ========== ==========
Total number of
shares outstanding 2,812,000 2,866,506 2,866,506
========== ========== ==========
</TABLE>
2
<PAGE>
CONTESSA CORPORATION
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
Unaudited
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
September 30, September 30,
1998 1999
------------- -------------
<S> <C> <C>
Income $ -0- $ -0-
Costs of goods sold - -0- -0-
---------- -----------
Gross profit -0- -0-
Operations:
General and 40,250 8,889
administration
Depreciation and
amortization -0- -0-
---------- -----------
Total expense 40,250 8,889
Net Profit (Loss)
from operations $ (40,250) $ (8,889)
========== ===========
Net income per
share-basic $ (.01) $ (.00)
========== ===========
Total number of
shares outstanding 2,812,000 2,866,506
========== ===========
</TABLE>
<PAGE>
CONTESSA CORPORATION
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
<TABLE>
<CAPTION>
For the period
For the nine For the nine from inception
months ended months ended March 7, 1996 to
September 30, September 30, September 30,
1998 1999 1999
------------- ------------- ----------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net profit (loss) $ (64,550) $ (55,803) $(347,329)
Depreciation and amortization -0- -0- -0-
Non-cash transactions 10,056
--------- --------- ---------
Total Cash Flows from
Operations (64,550) (55,803) (337,273)
Cash Flows from Financing Activities
Loan payable 10,150 10,150
Loan payable-affiliated parties 52,401 49,224 176,656
Sale of stock 301,037
--------- --------- ---------
Total Cash Flows from
Financing Activities 52,401 59,374 487,843
Cash Flows from Investing Activities
Capital assets (132,148)
Security deposit (10,533)
--------- --------- ---------
Total Cash Flows from
Investing Activities (142,681)
Net Increase(Decrease)in Cash (12,149) 3,571 7,889
Cash Balance Beginning
of Period 28,136 4,318 -0-
--------- --------- ---------
Cash Balance End of Period $ 15,987 $ 7,889 $ 7,889
========= ========= =========
</TABLE>
CONTESSA CORPORATION
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated
Date Preferred Preferred Common Commn Additional during
Stock Stock Stock Stock paid in development Total
stage
<S> <C> <C> <C> <C> <C>
Initial issuance of shares 2,100,000 $210 $210
Issuance of shares
for legal services 50,000 5 9,995 10,000
Cancellation of shares (750,000) (75) (75)
Sale of shares 850,000 85 299,915 300,000
Net loss (155,362) (155,362)
---------------------
--------
Balance 12-31-1996 2,250,000 225 291,910 (155,362) 136,773
Issuance of shares
for acquisition 562,000 56 196,644 196,700
Net loss (21,298) (21,298)
-----------------------------------------------------------------
12-31-1997 2,812,000 $281 $488,554 (176,660) $312,175
Sale of shares
under rule 504 54,006 6 18,896 18,902
Net loss --------- ------------- ------- -------------
(114,866) (114,866)
-------------------------
Balance 12-31-1998 2,866,506 $287 $507,450 (291,526) $216,211
Unaudited
Net loss (55,803) (55,803)
--------------------
Balance 6-30-1999 2,866,506 $287 $507,450 $(347,329) $160,408
========= ==== ===============================
</TABLE>
Note A - Basis of Reporting
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-Q. 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, such statements include all adjustments which are considered
necessary for a fair presentation of the financial position of Harmony Trading
Corp. (the "Company") at September 30, 1999 and the results of its operations,
and cash flows for the nine-month period then ended. The results of operations
for the nine-month period ended September 30, 1998 and 1999 are not necessarily
indicative of the operating results for the full year. It is suggested that
these financial statements be read in conjunction with the financial statements
and related disclosures for the year ended December 31, 1998 included in the
Company's Form 10-SB.
Note B - Net Income Per Share of Common Stock
In 1997, the Financial Accounting Standards Board issued Statement No.
128, "Earnings Per Share". Statement No. 128 replaced the calculation of primary
and fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share exclude any dilutive
effects of options, warrants, and convertible securities. Dilutive earnings per
share is very similar to the previously reported fully diluted earnings per
share. The Company has adopted Statement No. 128.
Note C - Income Taxes
The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of December 31, 1998 and September 30,
1999, the Company had no material current tax liability, deferred tax assets, or
liabilities to impact on the Company's financial position because the deferred
tax asset related to the Company's net operating loss carryforward and was fully
offset by a valuation allowance.
At September 30, 1999, the Company has net operating loss carry forwards
for income tax purposes of $347,329. This carryforward is available to offset
future taxable income, if any, and expires in the year 2010. The Company's
utilization of this carryforward against future taxable income may become
subject to an annual limitation due to a cumulative change in ownership of the
Company of more than 50 percent.
The components of the net deferred tax asset as of September 30, 1998 are as
follows:
<TABLE>
<S> <C>
Deferred tax asset:
Net operating loss carry forward $ 118,092
Valuation allowance $(118,092)
---------
Net deferred tax asset $ -0-
=========
</TABLE>
The Company recognized no income tax benefit for the loss generated in the
period from inception, March 7, 1996, to September 30, 1999.
SFAS No. 109 requires that a valuation allowance be provided if it is more
likely than not that some portion or all of a deferred tax asset will not be
realized. The Company's ability to realize benefit of its deferred tax asset
will depend on the generation of future taxable income. Because the Company has
yet to recognize significant revenue from the sale of its products, the Company
believes that a full valuation allowance should be provided.
3
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statements
The statements contained in this Report on Form 10-QSB that are not historical
facts are forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995) that involve risks and uncertainties.
Such forward-looking statements may be identified by, among other things, the
use of forward-looking terminology such as "believes," "expects," "may," "will,"
"should" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy that involve risks and
uncertainties. From time to time, the Company or its representatives have made
or may make forward-looking statements, orally or in writing. Such
forward-looking statements may be included in various filings made by the
Company with the Securities and Exchange Commission (the "SEC"), or press
releases or oral statements made by or with the approval of an authorized
executive officer of the Company. These forward-looking statements, such as
statements regarding anticipated future revenues, capital expenditures, Year
2000 compliance and other statements regarding matters that are not historical
facts, involve predictions. The Company's actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. Potential risks and uncertainties that
could affect the Company's future operating results include, but are not limited
to: (i) economic conditions, including economic conditions related to entry into
any new business venture; (ii) the availability of equipment from the Company's
vendors at current prices and levels; (iii) the intense competition in the
markets for the Company's new food products and menu selections; (v) the
Company's ability to effectively implement its branding strategy; and (vi) the
Company's ability to develop, market, provide, and achieve market acceptance of
new menu offerings to new and existing customers.
Development stage activities.
The Company has been a development stage enterprise since its inception
March 7, 1996 to December 31, 1998 and for the nine months ended September 30,
1999. During this period, management had devoted the majority of its efforts to
construction of the restaurant, pursuing and finding a management team to
continue the process of completing its marketing goals, obtain sufficient
working capital through officer loans and private placements. These activities
were funded by the Company's management aggregating $127,432 through December
31, 1998 and $176,656 through September 30, 1999, a loan from an unrelated party
for $10,000 and investments from stockholders aggregating $318,902 through
September 30, 1999. The Company has expended funds to purchase restaurant
equipment aggregating $132,148 through September 30, 1999, paid out $133,975 in
restaurant pre-opening expenses, paid security deposits of $10,533 and paid
$347,329 in general and administrative expenses for the period from inception,
March 7, 1996, through September 30, 1999. The Company has not yet generated
sufficient revenues during its limited operating history to fund its ongoing
operating expenses, repay outstanding indebtedness or to fund its food service
related expenses.
Results of Operations for the period from the Company's inception March 7, 1996
through September 30, 1999.
For the period from the Company's inception March 7, 1996 through
September 30, 1999, (a period of approximately 42 months) and for the three and
nine months ended September 30, 1999, the Company generated net sales of
approximately $-0-.
The Company's gross profit on sales was approximately -0-% for the
period from March 7, 1996 through September 30, 1999, and for the three and nine
month period ended September 30, 1999.
The Company's overhead costs aggregated approximately $347,329 for
the period from inception March 7, 1996 through September 30, 1999. Of these
initial start up costs, $155,362 is attributed to a consulting contracts for an
unrelated business operated prior to the Company's entrance into the restaurant
business, $140,526 in restaurant pre-opening expenses, an aggregate of $84,751
in rent and real estate taxes and an additional $11,690 related to
administrative costs of organizing the building of the new restaurant.
Liquidity and capital resources.
The Company increased liquidity by $7,889 from a cash balance at the
Company's inception of $-0-. The Company has been funded through the process of
selling shares of common stock through various private placements aggregating
$301,037 for the period, March 7, 1996 to September 30, 1999 which includes a
private placement to fund the new venture of $18,902 during 1998, and received
loans from officers amounting to $176,656 through September 30, 1999 and a loan
from an unrelated party for $10,000.
The Company expended an aggregate of $132,148 for equipment and
furnishings, $10,533 in security deposits, and paid an aggregate of $140,526 in
pre-opening expenses which has been charged to operations.
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred net losses
of $347,329 for the period from inception March 7, 1996 to September 30, 1999.
These factors indicate that the Company's continuation as a going concern is
dependent upon its ability to obtain adequate financing. The Company will
require substantial additional funds to finance its business activities on an
ongoing basis and will have a continuing
5
<PAGE>
long-term need to obtain additional financing. The Company plans to engage in
such ongoing financing efforts on a continuing basis.
RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
On or about November 4, 1999, the Company entered into A Merger Agreement and
Plan of Merger with Fullcomm, Inc., the holder of various patents relating to
hardware encryption devices. The consummation of the merger was dependent on the
completion of satisfactory due diligence. Prior to the consummation, Intel
Corporation, generally regarded as the world's leading manufacturer of
microchips announced the completion of certain encryption technology which, in
the opinion of the Company, would pose substantial competition to the Fullcom
technology. The Merger Agreement and Plan of Merger has accordingly been
terminated by the Company pursuant to the terms set forth in that document.
Item 6. Exhibits and Reports on Form 8-K
The Company did not file a report on Form 8-K during the three months
ended September 30, 1999.
6
<PAGE>
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Contessa Corporation
(Registrant)
Date: November 15, 1999 By: /s/ Thomas Knudson
-----------------------
President and Treasurer
By: /s/ Anthony Markofsky
----------------------------
Vice President and Secretary
Treasurer
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
financial statements for the three month period ended March 31, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 4,518
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,518
<PP&E> 132,148
<DEPRECIATION> 0
<TOTAL-ASSETS> 343,843
<CURRENT-LIABILITIES> 174,556
<BONDS> 0
0
0
<COMMON> 287
<OTHER-SE> 169,000
<TOTAL-LIABILITY-AND-EQUITY> 169,287
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> (338,450)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (338,450)
<INCOME-TAX> 0
<INCOME-CONTINUING> (338,450)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (338,450)
<EPS-BASIC> (.12)
<EPS-DILUTED> (.12)
</TABLE>
