<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
Amendment No. 2
to
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
INTERALLIED GROUP, INC.
(Name of Small Business Issuer in Its Charter)
Nevada 14-1775226
---------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1 Jacqueline Street
Suite 102
New Windsor, New York 12553
(Address of principal executive offices)
(914) 534-4909
(Issuer's telephone number, including area code)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
------------------- ------------------------------
Not applicable Not applicable
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $0.01 per share
================================================================================
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PART I
Item 1. Description of Business.
Introduction
Interallied Group, Inc. (the "Company") through its subsidiary Dining
Experience, Inc. ("Dining Experience") is engaged in establishing and marketing
a monthly gourmet meal. The Company acquired Dining Experience in March 1999.
Dining Experience was formed in December 1998 and has developed a unique
marketing concept for its products. The sale of the Company's products will be
sold through a network of independent participants in a multi level marketing
program. As its original product and concept Dining Experience has developed a
gourmet meal of the month program (for two or more) delivered fresh to the
Purchaser's home via overnight carrier. It is anticipated that Dining Experience
will commence operations in the first quarter of 2000.
Dining Experience is currently the only significant operation of the Company.
Commencing in 1996 the Company was engaged in establishing franchised
restaurants. The Company had an arrangement with Damon International, Inc. which
owns franchises and operates Damon's The Place for Ribs Restaurant and
Clubhouse, a sports and family oriented ribs style chain restaurant. Pursuant to
that arrangement, the Company entered into a joint venture with Damon's opening
a Damon's Restaurant in Buffalo, New York. The Company owned 51% of the joint
venture. The Company opened a second Damon's The Place for Ribs Restaurant in
Rochester, New York owning a 25% interest in the entity operating the
restaurant. These restaurants did not generate a significant amount of income
and operated at a loss. The Company sold its interest in the Buffalo restaurant
in January 1999. Other than the maintenance of its minority interest in an
entity operating the Rochester restaurant, the Company has ceased all activities
relating to Damon's restaurants.
During 1998 the Company contemplated acquiring a woman's accessory company
designing handbags with a cigar box theme. An option was entered into in
September 1998 to acquire this Company. The Company also entered into consulting
agreements to provide marketing and consulting services to several entities
including cigar manufacturers and cigar distributors. The option to acquire the
accessory company was modified in December 1998 with shares issued in connection
with the option returned. The Company did not exercise the option. During 1999
all the consulting arrangements were terminated.
The Company was formed as European American Leasing Corporation in Nevada on May
27, 1975. In November 1993, it acquired in a reverse acquisition a corporation
organized to engage in the restaurant business. At that time the Company changed
its name from Sunnyland Tours, Inc. to Interallied Restaurant Group, Inc. In
January 1999 it changed its name to Interallied Group, Inc.
2
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The Company is located at One Jacqueline Street, Suite 102, New Windsor, New
York 12553. As used herein unless otherwise indicated by the contract the term
"Company" includes the Company and its subsidiaries.
Dining Experience
Introduction
Dining Experience was formed in 1998 to implement a monthly Gourmet meal plan.
Each month a member or participant of the Plan would receive all the ingredients
for a gourmet meal pursuant to a recipe from a participating restaurant. The
Company proposes providing to its members through courier delivery substantially
all the ingredients for the meal with a recipe and instructions for the
preparation of the gourmet meal. The Company's strategy is to establish a
network of participating members to market the meal plan and other products. The
Company will also market the plan through participating merchants.
Each member would receive a membership card entitling the member to certain
additional benefits. Each month the subscriber would receive a package through a
courier. The package will contain the featured entree for two. All condiments
are provided together with a vegetable and, should the recipe call for it, rice
or pasta, soup and/or an appetizer. Dessert and salad will be included with
every meal. The monthly package would also contain:
1. A complete history covering the restaurant and the city where it's
located
2. Information about the chef who created the recipe.
3. Origin of the main course.
4. All necessary ingredients to prepare a main entree for two, other than
dairy and egg thereby eliminates the need to search for out of season
ingredients.
5. All necessary ingredients for vegetable side dish, rice or pasta, soup
and/or appetizer as well as desert.
6. A complete list of all the ingredients included.
7. A nutritional fact sheet.
8. Simple instructions to guide the subscriber through complete preparation
of the meal. Full-color photographs to assist in the creation of the
meal.
While the Company has not began to commence delivery of the meal plan it has
taken several steps toward implementation.
The Company is in the process of obtaining Agreements with a number of upscale
restaurants from coast to coast. The type of restaurants desired by the Company
will range be from cozy country inns to big city restaurants. Included with the
meal will be a history of the restaurant,
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information about the owner(s) and the chef and a detailed signature recipe. It
has entered into agreements with several restaurants including four Italian
restaurants, two Spanish restaurants and three Continental restaurants, to
utilize the recipe's of these restaurants for the meal plan. The restaurant
supplies the recipe and other information without cost to the Company. The name
of the restaurant is promoted through the plan and is featured in the monthly
package.
The Company has also entered into an arrangement with an unaffiliated firm in
the Philadelphia area to deliver the meals to plan members. This firm obtains
and assembles the ingredients on behalf of the Company in accordance with the
specifications of the particular monthly recipe provided by the restaurant. All
deliveries through the courier will be made by this firm on behalf of the
Company. The Company is not required to maintain an inventory.
The heart of the Company's plan is creation of a network of sale participants in
the program as consumers and marketers. The sale participants are independent
contractors. The Company hopes that each sale participant will bring in
additional sale participants. The Company has formulated its distribution
program, prepared a manual for its participating members as well as other
promotional materials for the marketing of the Plan. The program calls for
nominal payment by the distributor member of less than $100. The plan envisions
five levels of achievement for sale participants depending on the number of
sales made by the sale participants and the number of additional sale
participants which becomes part of the program through such participant. The
compensation and discounts for products which a sale participant receives is
dependent on the level of sales and other levels achieved by the sale
participants. The Company has entered into arrangements with 76 sale
participants.
The Company has also formulated a program for merchant participants. The Company
will provide for the merchant an area listing on the "Participating Merchants
Page" of the Company's web site, including merchants' name, address, telephone
number, description of business and incentive or discounts being offered, in
addition to a window decal, a counter card with logo, a merchants' card for
their personal use and listings in the Company's promotional material.
Participating merchants will not be limited to restaurants, but will including
cleaners, florists, hair salons and other stores.
Future Plans
Future plans for additional products include Dietetic meals, Vegetarian meals,
Kosher meals, Once-a-Year Picnic packages and Holiday season packages.
The Company is in the process of adding gourmet food and food related items to
its product line, such as a Wine of the Month program, spice rack, aged Balsamic
Vinegar, extra virgin olive oil package and pasta serving bowls including
plates.
4
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All participants will receive a Participant Membership Card which will entitle
the holder to discounts from participating restaurants nationwide. These
locations will be published in the Company's newsletter and will be listed on
the Company's web site.
To increase the Dining Experience's customer base, the Company intends to sell
Participating Memberships through local area fund raising organizations, Little
League, civic organizations and religious organizations, etc. which will create
corporate exposure and potential customers for Dining Experience products. The
Company intends to saturate specific demographic markets which will create
sufficient merchant participation providing a broad selection of outlets for the
Dining Experience participants.
The Company intends to hold gourmet food and cooking seminars. These seminars
will be held at participating restaurants, local hotels and in selected areas
utilizing the Company's mobile kitchen.
The Company anticipates by First Quarter of the Year 2000 to produce a corporate
and product infomercial.
Employees
The Company has two paid employees and Dining Experience has two paid employees.
Competition
The Company is not aware of any competing monthly gourmet meal plan.
Nevertheless, the Company may face substantial competition for disposable income
for gourmet food from restaurants and gourmet food stores. The Company also
believes a substantial amount of its income may be generated from participants
and potential participants who may view the plan is marketing organization in
which the participant may also derive income. There are a substantial number of
competing marketing organizations as Amway.
Trademark
Dining Experience has developed a logo, but it has not caused the trademark to
be registered.
Item 2. Management's Discussion and Analysis and Plan of Operation.
Plan of Operation
The Company's first priority is to inaugurate the meal plan of its subsidiary
Dining Experience. Dining Experience prior to the acquisition by the Company has
and continues to:
5
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o enter into arrangements with restaurants;
o develop its sales participation and membership program;
o enter into arrangements for distribution of is monthly meal; and
o develop promotional and marketing material.
The Company believes it will be in a position to implement Dining Experience's
monthly meal plan program in the first quarter of 2000.
Thereafter it anticipates developing additional variations to its gourmet meal
plan, develop additional products and introduce food seminars to strengthen its
marketing program.
General
The following discussion and analysis should be read in conjunction with the
financial statements and related notes contained elsewhere in this statement.
As the Company sold its 51% interest in a restaurant in Buffalo and is
concentrating its efforts upon Dining Experience operations; comparisons between
1998 and 1997 and future periods may not be appropriate.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998 (unaudited)
During the nine months ending September 30, 1998, the company had revenues of
$1,001,713 and no revenues in the nine months period ended September 30, 1999.
All the revenues in the nine month period ended September 30, 1998 were derived
from the operations at the Damon's Restaurant in Buffalo. The Company sold its
interest in this restaurant in January 1999 and has not commenced operations of
Dining Experience.
During the nine month period ended September 30, 1999 the Company's general,
administrative and operating expenses amounted to approximately $185,702
primarily due to the start-up activities with respect to Dining Experience. The
Company also reflected $44,478 for amortization of Dining Experience. The
Company had a one time gain in January 1999 of $176,880 upon the sale of its 51%
interest in the Damon Buffalo resturant. Because cumulative losses exceeded its
basis the Company did not record any loss related to its interest in Rochester
during this period. The Company had a net loss of $54,773 during the nine months
ended June 30, 1999 compared to a loss of approximately $165,989 for the
comparable period. The loss was attributed to the absence of revenue, general
start up costs of Dining Experience and amortization of the acquisition of
Dining Experience.
Fiscal Year 1998 compared to Fiscal Year 1997
During 1998 and 1997 all revenues were derived from the Company's Damon Buffalo
restaurant. Revenues amounted to approximately $1,321,000 in 1998 and $1,320,000
in 1997. Cost of sales increases in 1998 so that the Company's gross profit
decreased by approximately $21,000 from $902,000 to $881,000. General,
administrative and operating expenses decreased by $103,000 during the 1998
period due in part to a $56,000 reduction in rent expense for the restuarant
site. After reflecting the minority interests' 49% share of loss, the Company's
loss from the operations of Damon Buffalo decreased from $80,000 in 1997 to
$35,000 in 1998.
6
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The Company was therefore able to reduce its net loss to approximately $265,000
in 1998 from approximately $277,000 in the prior period.
Liquidity
The Company has historically during the last three years experienced negative
cash flow from operations. The Company was able to derive all its operating
capital from advances by shareholders and sales of common stock. Dining
Experience has received advances of $75,000.
Item 3. Description of Property.
The Company's executive offices are located at 1 Jacqueline Street, Suite 102,
New Windsor, New York 12553, where it leases approximately 750 square feet. This
lease expires on February 28, 2001. The annual base rental for this space is
approximately $10,000.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information as of the date hereof
regarding the ownership of the Company's common stock by: each person we know
owns 5% or more of our outstanding shares; each of our directors; and all
officers and directors of the Company as a group. Each owner of the common stock
has sole voting and investment power for all shares listed below, except as
otherwise indicated.
Name and Amount and
Address of Nature of Percent
Beneficial Beneficial of
Owner Ownership Class
---------- ---------- -------
Joseph Columbo 300,000 19%
Rhonda Rabetsky 150,000 10%
Ira Keeperman 45,000 2%
Maureen Siruell -0- -
Patrice Croghan 45,000 2%
All directors and officers
as a group (3 persons)1 90,000 6%
-------- -----
630,000 39%
1 Does not include shares owned by Mr. Columbo's spouse or on entity in which
his spouse has an interest. Mr. Columbo denies beneficial ownership of such
shares.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and executive officers of the Company are as follows:
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Name Age Position
---- --- --------
Ira Keeperman 47 President, Chief Executive Officer and Director
Patrice Croghan 38 Secretary/Treasurer
Maureen Sirull 42 Vice President
Scott Morris 36 President, Dining Experience
Ira Keeperman, was one of the original Founders of the Company in 1994 and has
served as President and Director since the Company's inception. Mr. Keeperman
was responsible for the development of the Company's two Franchise Restaurants,
Damon's Place For Ribs. Prior to joining the Company and continuing to this
date, Mr. Keeperman is President of Keep Food Brokers. Mr. Keeperman is
presently responsible for the implementation and overseeing of the Company's
sales and marketing strategies.
Patrice Croghan, served as Secretary/Treasurer and a Director of the Company
since its inception. Ms. Croghan's responsibilities include overseeing the
financial and accounting areas for the Company along with marketing research and
survey analysis.
Maureen Sirull, joined the Company in 1995 and worked as Assistant to the
President and was responsible for the daily operation of the Company. Ms. Sirull
was appointed to the position of Vice President and serves as an Officer and
Director of the Company. Prior to joining the Company, Ms. Sirull was employed
for over ten years as a legal assistant. Her duties included training of staff,
interviewing clients and overseeing all aspects of the case and preparing the
case for trial. Ms. Sirull manages the Company's staff and is directly
responsible for sales and marketing material along with the Company's daily
accounting. In addition, Ms. Sirull serves on the board of directors of Dining
Experience, Inc.
Scott Morris, from 1998 Mr. Morris has been engaged in devoting substantially
all his time to the affairs of Dining Experience. From 1988 to 1998 he was
employed by Express Industries as a Marketing Consultant.
Directors are elected to serve until the next annual meeting of stockholders of
the Company or until their successors are elected and qualified. There are no
audit, compensation or other committees of the board of directors.
Item 6. Executive Compensation.
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The following table sets forth information concerning compensation paid or
accrued by the Company or its subsidiaries for services rendered during fiscal
years 1998 and 1997 to our chief executive officer. No other executive officer's
compensation exceeded $100,000 during either of these fiscal years.
Summary Compensation Table
Name and Principal Position Year Salary
- --------------------------- ---- ------
Ira Keeperman, Chief Executive Officer 1998 $ 0
1997 $ 0
Item 7. Certain Relationships and Related Transactions.
In April 1999 the Company exchanged 500,000 shares of its common stock for all
the issued and outstanding shares of Dining Experience, Inc. a start-up venture
intending to market gourmet meals pursuant to monthly and various other Plans.
The aforesaid 500,000 shares were issued to Dining Experience's three
shareholders, two of whom became affiliates as follows:
Joseph Columbo 300,000
Rhonda Rabetsky 150,000
A corporation owned by the spouse of or an affiliate of the Company is the
lessor of the Company's offices pursuant to a five year lease with a base annual
rent of approximately $10,000.
Item 8. Legal Proceedings.
There are no legal proceeding involving the Company.
Item 9. Market For Common Equity and Related Stockholder Matters.
Our common stock is currently quoted on the OTC Bulletin Board under the symbol
"ILRG".
Set forth below are the high and low closing bid quotations for our common stock
for the periods indicated as reflected on the electronic bulletin board. Such
quotations reflect interdealer prices without retail mark-up, mark-down or
commissions, and may not reflect actual transactions. The prices below do not
reflect a one for twenty stock split effected in September, 1998 for periods
prior to such date.
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Period Ending High Low
-------------- ------ ------
June 30, 1999 $5.500 $4.750
March 31, 1999 5.250 4.625
December 31, 1998 4.250 4.000
September 30, 1998 0.313 0.063
June 30, 1998 0.125 0.063
March 31, 1998 0.375 0.063
December 31, 1997 0.125 0.125
September 30, 1997 0.688 0.375
June 30, 1997 0.375 0.250
March 31, 1997 1.313 0.063
As of October 15, 1999, there were approximately 195 recordholders of the our
common stock, although we believe that there are more than five hundred
beneficial owners of our common stock. There are no shares of preferred stock
currently outstanding.
Item 10. Recent Sales of Unregistered Securities.
In September and October 1998, the Company sold shares of its common stock.
Consideration for such shares included cash and forgiveness of debt owed by it
to some of the purchasers. Sales occured at prices ranging from $.20 per share
to $1.00 per share. The shares were issued as a transaction exempt from the
registration requirements pursuant to Rule 504.
As consideration for the issuance of an option to acquire a women's accessory
company the Company issued shares of Preferred Stock which converted into
245,000 shares of common stock in consideration of the options. The shares were
issued pursuant to an exemption from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof. All these shares were returned
to the Company and cancelled upon modification of this Option which was not
exercised.
In March 1999, the Company issued 500,000 shares of its common stock to three
individuals in exchange for shares of Dining Experience. The Company believes
the issuance of such shares is exempt from the registration requirements
pursuant to Section 4(2) of the Securities Act.
Item 11. Description of Securities.
The Company is currently authorized to issue 20,000,000 shares of common stock,
$.01 par value and 5,000,000 shares of preferred stock, par value $.001 per
share.
Common Stock
Each share of common stock entitles the holder thereof to one vote on all
matters submitted to a vote of the stockholders. Since the holders of common
stock do not have cumulative voting rights, holders of more than 50% of the
outstanding shares can elect all of the directors of Company and
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holders of the remaining shares by themselves cannot elect any directors. The
holders of common stock do not have preemptive rights or rights to convert their
common stock into other securities. In the event of a liquidation, dissolution
or winding up of the Company, holders of the common stock have the right to a
ratable portion of the assets remaining after payment of liabilities. All of the
outstanding shares of common stock are duly authorized, validly issued, fully
paid and non-assessable.
The holders of shares of common stock are entitled to dividends when and as
declared by the board of directors from funds legally available therefor. The
Company has never declared or paid cash dividends on its common stock. The
Company intends to retain its net income, if any, to increase its capital base
and, accordingly, does not currently anticipate paying cash dividends. Any
decision on the future payment of dividends is solely at the discretion of the
board of directors and will depend on various factors including the results of
our operations and our financial condition.
Preferred Stock
The Company's certificate of incorporation authorizes the issuance of "blank
check" preferred stock with whatever designation, rights and preferences as may
be determined by the board of directors. Accordingly, the board is empowered,
without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which could adversely affect the
voting power or other rights of the holders of common stock. The preferred stock
could be utilized, under certain circumstances, as a method of discouraging,
delaying or preventing a change in control of the Company. Although we do not
currently intend to issue any shares of preferred stock, there can be no
assurance that we will not do so.
Transfer Agent
The transfer agent for the Company's common stock is Jersey Transfer Trust
Company. Its telephone number is (973) 239-2712.
Item 12. Indemnification of Directors and Officers.
The By-law authorize indemnification of officers and directors.
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Item 13. Financial Statements
12
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Item 14. Changes in and Disagreements with Accountants.
None of the events described in Item 304 of Regulation S-B has occurred within
the past twenty-four months.
Item 15. Financial Statements and Exhibits.
[List separately all financial statements filed a part of the Registration
Statement.]
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(B) Exhibits
Exhibit No. Description
- ----------- -----------
3.1 Certificate of Incorporation
3.2 Amendment to Certificate of Incorporation
By-Laws
10.1 Agreement dated December 27, 1998 between the Company and H&H
Management LLC for sale of interest in Interallied Restaurant
Group of Buffalo, Inc.
10.2 Exchange Agreement dated March 31, 1999 among the Company and
Shareholder of Dining Experience.
21.1 Subsidiary List
27 Financial Data Schedule
14
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SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, hereunto duly authorized.
Date: November 30, 1999
INTERALLIED GROUP, INC.
By: /s/ Maureen Siruell
----------------------------
Maureen Siruell
15
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INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Interallied Group, Inc.
We have audited the accompanying consolidated balance sheet of Interallied
Group, Inc. and subsidiaries as of December 31, 1998 and the related
consolidated statements of operations, stockholders' equity (deficiency), and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Interallied Group, Inc. and subsidiaries as of December 31, 1998, and the
consolidated results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
Richard A. Eisner & Company, LLP
New York, New York
June 12, 1999
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Interallied Group, Inc.
We have audited the accompanying consolidated statements of operations,
stockholders' deficiency and cash flows for the year ended December 31, 1997 of
Interallied Restaurant Group, Inc. and subsidiaries (the "Company"). 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. We did not audit the financial
statements of Interallied Restaurant Group of Buffalo, Inc., a 51% owned
subsidiary, which statements reflect total assets constituting approximately 88%
of consolidated total assets and 73% of consolidated total liabilities as of
December 31, 1997. Such financial statements were audited by other auditors
whose report has been furnished to us, and our opinion, insofar as it relates to
the amounts included for Interallied Restaurant Group of Buffalo, Inc. is based
solely on the report of such other auditors.
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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the results of the Company's operations and its cash flows
for the year ended December 31, 1997 in conformity with generally accepted
accounting principles.
Scarano & Tomaro, P.C.
Syosset, New York
May 13, 1998
F-2
<PAGE>
INTERALLIED GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- --------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,348 $ 8,281
Note receivable (Note C) 31,541
Other receivables 38,070 30,201
--------------- -------------
Total current assets 71,959 38,482
Fixed assets, net 18,137 1,135
Intangible asset, net (Note H) 222,387
--------------- -------------
$ 312,483 $ 39,617
=============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable and accrued expenses $ 20,102 $ 30,391
Due to stockholder 55,744 30,848
Net liabilities applicable to subsidiary to be sold (Note C) 15,431
Notes payable (Note H) 78,463
--------------- -------------
Total current liabilities 154,309 76,670
--------------- -------------
Commitment (Note I)
Stockholders' equity (deficiency) (Note G):
Preferred stock; $.001 par value; 5,000,000 shares authorized;
no shares issued or outstanding
Common stock; $.01 par value; 20,000,000 shares authorized;
1,661,297 and 1,161,297 shares issued and outstanding 16,613 11,613
Additional paid-in capital 1,280,874 1,035,874
Accumulated deficit (1,139,313) (1,084,540)
--------------- -------------
158,174 (37,053)
--------------- -------------
$ 312,483 $ 39,617
=============== =============
</TABLE>
See notes to financial statements F-3
<PAGE>
INTERALLIED GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
------------------------------- --------------------------------
1999 1998 1998 1997
---------- ------------- ------------ -------------
(unaudited)
(Note C) (Note C)
<S> <C> <C> <C> <C>
Sales $ 1,001,713 $ 1,321,156 $ 1,322,945
Cost of sales 318,312 439,915 421,238
------------- ------------- -------------
Gross profit 683,401 881,241 901,707
General, administrative and other operating expenses $ 186,702 827,496 1,100,011 1,203,661
Amortization of intangible asset 44,478
------------ ------------- ------------- -------------
Loss before other income (expense) and minority
interest (231,180) (144,095) (218,770) (301,954)
------------ ------------- ------------- -------------
Other income (expense):
Gain on sale of subsidiary 176,880
Share of loss of affiliate (33,399) (59,621) (22,879)
Interest expense (473) (20,451) (20,163) (28,828)
------------ ------------- ------------- -------------
176,407 (53,850) (79,784) (51,707)
------------ ------------- ------------- -------------
Loss before minority interest (54,773) (197,945) (298,554) (353,661)
Minority interests' share of loss 31,956 33,857 76,538
------------ ------------- ------------- -------------
Net loss $ (54,773) $ (165,989) $ (264,697) $ (277,123)
============ ============= ============= =============
Net loss per share - basic and diluted $(.04) $(.50) $(.58) $(1.13)
===== ===== ===== ======
Weighted average shares outstanding 1,494,630 334,508 460,049 245,106
============ ======= ======= =======
</TABLE>
See notes to financial statements F-4
<PAGE>
INTERALLIED GROUP, INC. AND SUBSIDIARIES
See notes to financial statements
Consolidated Statement of Stockholders' Equity (Deficiency)
<TABLE>
<CAPTION>
Total
Common Stock Additional Stock Stockholders'
------------------------ Paid-in Accumulated Subscription Equity
Shares Amount Capital Deficit Receivable (Deficiency)
------------------------ ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 266,734 $ 53,102 $ 1,271,160 $ (542,720) $ (840,000) $ (58,458)
Proceeds from stock
subscription receivable 242,500 242,500
Stock dividend 53,538 10,669 (10,669) 0
Net loss for the year (277,123) (277,123)
----------- ----------- ------------ ------------- ------------ ------------
Balance at December 31, 1997 320,272 63,771 1,260,491 (819,843) (597,500) (93,081)
Issuance of common stock in
connection with an
offering at $.20 per share 50,000 10,000 10,000
Issuance of common stock in
connection with services
provided to the Company 32,500 6,500 6,500
Issuance of common stock in
connection with repayment
of loans and accrued interest 657,500 131,500 131,500
Rescind issuance of stock (71,700) (14,340) (583,160) 597,500 0
Transfer par value of common
stock in connection with
1 for 20 reverse stock split (187,545) 187,545 0
Issuance of common stock in
connection with an
offering at $1 per share 145,000 1,450 143,550 145,000
Issuance of common stock in
connection with repayment
of loans 27,725 277 27,448 27,725
Net loss for the year (264,697) (264,697)
----------- ----------- ------------ ------------- ------------ ------------
Balance at December 31, 1998 1,161,297 11,613 1,035,874 (1,084,540) 0 (37,053)
Stock issued for acquisition
of subsidiary 500,000 5,000 245,000 250,000
Net loss for the period (54,773) (54,773)
----------- ----------- ------------ ------------- ------------ ------------
Balance at September 30, 1999
(unaudited) 1,661,297 $ 16,613 $ 1,280,874 $ (1,139,313) $ 0 $ 158,174
=========== =========== ============ ============= ============ ===========
</TABLE>
See notes to financial statements F-5
<PAGE>
INTERALLIED GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
-------------------------- ----------------------------
1999 1998 1998 1997
----------- ----------- ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (54,773) $ (165,989) $ (264,697) $ (277,123)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 46,546 1,815 1,942 5,267
Expenses paid by issuance of stock 6,500 6,500
Gain on sale of subsidiary (176,880)
Share of loss of affiliate 33,399 59,621 22,879
Changes in:
Other receivables (7,869) (16,213) (30,201)
Accounts payable and accrued expenses (18,050) 10,160 1,767 (15,965)
Net liabilities applicable to subsidiary to be sold 33,375 35,238 54,162
------------ ------------ ------------ ------------
Net cash used in operating activities (211,026) (96,953) (189,830) (210,780)
------------ ------------ ------------ ------------
Cash flows from investing activities:
Purchase of fixed assets (1,924)
Investment in affiliate (82,500)
Proceeds from sale of subsidiary 130,908
Net cash acquired in connection with acquisition of
subsidiary 14,559
------------ ------------
Net cash provided by (used in) investing
activities 143,543 (82,500)
------------ ------------
Cash flows from financing activities:
Advances from stockholders 36,550 39,600 41,725 13,645
Proceeds from notes payable 25,000
Proceeds from sale of stock 57,395 155,000
Collections on stock subscriptions receivable 242,500
------------ ------------ ------------ ------------
Net cash provided by financing activities 61,550 96,995 196,725 256,145
------------ ------------ ------------ ------------
Net increase (decrease) in cash (5,933) 42 6,895 (37,135)
Cash, beginning of period 8,281 1,386 1,386 38,521
------------ ------------ ------------ ------------
Cash, end of period $ 2,348 $ 1,428 $ 8,281 $ 1,386
============ ============ ============ ============
Supplemental disclosures of noncash activities:
Issuance of stock for acquisition of subsidiary $ 250,000
Issuance of stock in repayment of stockholder loans $ 128,705 $ 159,225
Recission of stock not paid for $ 597,500 $ 597,500
Note received in connection with sale of subsidiary $ 61,449
</TABLE>
See notes to financial statements F-6
<PAGE>
INTERALLIED GROUP, INC. AND SUBSIDIARIES
Notes to Financial Statements
Unaudited With Respect to September 30, 1999 and
for the Nine-Month Periods Ended September 30, 1999 and 1998
NOTE A - GENERAL
Interallied Group, Inc. (the "Company"), which changed its name from Interallied
Restaurant Group, Inc. on January 12, 1999, is a holding company. During 1997
and 1998 the Company owned a 51% interest in a franchised restaurant which was
sold in January 1999, (see Note C). The Company continues to hold a 25% interest
in a second franchised restaurant which was acquired in 1997 (see Note D).
During March 1999 the Company acquired a development stage marketing company
(see Note H).
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1] Interim periods:
The unaudited interim financial statements for the nine months ended
September 30, 1999 and 1998 included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission and, in the opinion of the Company,
reflect all adjustments (consisting only of normal recurring accruals)
which are necessary for a fair presentation. The results of operations
for the nine months ended September 30, 1999 are not necessarily
indicative of the results for the year ending December 31, 1999.
[2] Principles of consolidation:
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Dining Experience, Inc. (from the date
of its acquisition in March 1999), and its 51% owned subsidiary,
Interallied Restaurant Group of Buffalo, LLC ("Interallied of Buffalo")
which was sold in January 1999. Interallied of Buffalo has adopted a
52/53 week fiscal year, ending on the Sunday closest to December 31. All
significant intercompany transactions have been eliminated in
consolidation. The Company has a 25% interest in Interallied Restaurant
Group of Rochester, LLC which is accounted for under the equity method.
The 1997 financial statements have been reclassified to conform with the
1998 presentation. In addition, the stockholders' deficiency at December
31, 1997, as previously reported, has been increased by $5,000 to reflect
a reduction of proceeds from stock subscription receivable.
[3] Inventory:
Inventory (included in net liabilities applicable to subsidiary to be
sold) consists of food, beverages and supplies, and is valued at the
lower of cost or market value. Cost is determined using the first-in,
first-out method.
[4] Revenue recognition:
Revenue is recognized at the time of sale.
[5] Per share data:
Net loss per share is computed based on the weighted average number of
shares of common stock outstanding during each period after giving
retroactive effect to the 1 for 20 reverse split and excluding rescinded
shares from the calculation.
The number of shares and per share prices reflected in the financial
statements and accompanying footnotes give retroactive effect to a 1 for
20 reverse split of common stock effected September 30, 1998.
F-7
<PAGE>
INTERALLIED GROUP, INC. AND SUBSIDIARIES
Notes to Financial Statements
Unaudited With Respect to September 30, 1999 and
for the Nine-Month Periods Ended September 30, 1999 and 1998
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
[6] Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
NOTE C - SALE OF SUBSIDIARY
During January 1999, effective as of December 27, 1998, the Company sold at a
gain of $176,880 its 51% interest in Interallied of Buffalo to one of the
minority stockholders. Interallied of Buffalo operated a "Damons the Place for
Ribs", restaurant in the Buffalo, New York area under a franchise agreement. The
sales price was $161,449 of which $100,000 was paid in cash on January 15, 1999,
and $61,449 was paid by a note which bears interest at 8% and is due in 16
monthly installments of $4,062 beginning February 1, 1999. In addition, the
sales agreement provides for additional consideration not to exceed $68,051 due
over the next five years through 2003 based upon the profits of Interallied of
Buffalo. The balance of the note as of September 30, 1999 totaled $31,541.
The assets and liabilities of Interallied of Buffalo as of December 31, 1998,
which are classified in the balance sheet as net liabilities applicable to
subsidiary to be sold, consisted of the following:
Assets:
Cash $ 33,038
Inventory 15,686
Other current 71,179
Equipment under capital leases, fixtures and leasehold
improvements, net of accumulated amortization of
$215,203 312,280
-----------
Total assets 432,183
-----------
Liabilities:
Accounts payable and accrued expenses (301,658)
Capital lease obligations (139,953)
Minority interest (6,003)
-----------
Total liabilities (447,614)
-----------
Net liabilities $ (15,431)
===========
F-8
<PAGE>
INTERALLIED GROUP, INC. AND SUBSIDIARIES
Notes to Financial Statements
Unaudited With Respect to September 30, 1999 and
for the Nine-Month Periods Ended September 30, 1999 and 1998
NOTE C - SALE OF SUBSIDIARY (CONTINUED)
Results of operations of Interallied of Buffalo included in the accompanying
statements of operations follows:
<TABLE>
<CAPTION>
Nine Months Year Ended
Ended December 31,
September 30, ------------------------------
1998 1998 1997
------------- ------------- -------------
(unaudited)
<S> <C> <C> <C>
Sales $1,001,713 $ 1,321,156 $ 1,322,945
Cost of sales 318,312 439,915 421,238
---------- ------------- -------------
Gross profit 683,401 881,241 901,707
General, administrative and other operating expenses 736,050 934,302 1,036,678
Interest expense 12,568 16,033 21,229
---------- ------------- -------------
Loss before minority interest (65,217) (69,094) (156,200)
Minority interests' share of loss 31,956 33,857 76,538
---------- ------------- -------------
Net loss $ (33,261) $ (35,237) $ (79,662)
========== ============= =============
</TABLE>
Rent expense for the restaurant site for the years ended December 31, 1998 and
1997 was $60,000 and $115,523, respectively.
Royalty expense incurred pursuant to a franchise agreement with an affiliate of
one of the minority stockholders for the years ended December 31, 1998 and 1997
amounted to $52,868 and $49,948, respectively. Management fees incurred pursuant
to an agreement with an affiliate of one of the minority stockholders for the
years ended December 31, 1998 and 1997 amounted to $26,434 and $31,998,
respectively. Included in accounts payable are $114,822 of unpaid royalties and
management fees at December 31, 1998.
NOTE D - INVESTMENT IN AFFILIATE
In 1997, the Company invested $82,500 for a 25% interest in Interallied of
Rochester, LLC ("Rochester") which was formed in 1997 to build and operate under
a franchise agreement a "Damons the Place for Ribs" restaurant. The restaurant
commenced operations in December 1997. The Company accounts for its investment
under the equity method and reflected losses of $59,621 in fiscal 1998 and
$22,879 in fiscal 1997 as its share of losses incurred by Rochester. The
Company's share of Rochester's losses in excess of its investment in Rochester,
amounting to $21,971 for the nine months ended September 30, 1999 and $6,490 for
the year ended December 31, 1998, have not been reflected in the accompanying
financial statements as the Company has not guaranteed obligations of Rochester
and is not otherwise committed to provide financial support to Rochester.
F-9
<PAGE>
INTERALLIED GROUP, INC. AND SUBSIDIARIES
Notes to Financial Statements
Unaudited With Respect to September 30, 1999 and
for the Nine-Month Periods Ended September 30, 1999 and 1998
NOTE D - INVESTMENT IN AFFILIATE (CONTINUED)
Condensed financial information of Rochester follows:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
(unaudited)
<S> <C> <C>
Assets $ 851,239 $ 1,019,460
Liabilities (965,082) (1,045,418)
--------- -----------
Members' deficiency $(113,843) $ (25,958)
========= ===========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
------------------------------ -----------------------------
1999 1998 1998 1997
------------- ------------ ------------ -----------
(unaudited)
<S> <C> <C> <C> <C>
Sales $ 1,471,385 $ 1,530,813 $ 1,865,737 $ 890,937
============= ============= =========== ============
Net loss $ (87,885) $ (133,597) $ (264,442) $ (91,516)
============= ============= ========== ============
</TABLE>
NOTE E - NOTES AND ADVANCES PAYABLE - STOCKHOLDERS
On June 30, 1995, the Company issued a promissory note in connection with a
$88,000 loan from a stockholder. Such note is unsecured and bears an interest
rate of 5.75% per annum. The balance of the note and accrued interest at both
September 30, 1999 and December 31, 1998 totaled $30,848. Interest accrued on
the note through November 20, 1998, at which time substantially all of the note
was repaid through the issuance of common stock valued at $75,000. In August
1999, the holder of the note agreed to accept 61,696 shares of common stock in
payment of the balance of the note and the accrued interest. Such shares were
issued in October 1999. Interest expense related to the note amounted to $4,908
and $5,351 for the years ended December 31, 1998 and 1997, respectively.
During 1996, the Company issued a promissory note in connection with a $42,500
loan from another stockholder. Such note was unsecured, payable during 1998, and
bore an interest rate of 5.75% per annum. Interest expense related to the note
amounted to $2,035 and $2,567 for the years ended December 31, 1998 and 1997,
respectively. Such note was paid by the issuance of common stock during the year
ended December 31, 1998. In connection therewith, accrued interest of $6,740 on
a note payable to a stockholder was forgiven and credited to interest expense.
During the year ended December 31, 1998, the Company received advances from
stockholders totaling $41,725 which were repaid during the year by the issuance
of common stock. No interest was charged on these advances.
NOTE F - INCOME TAXES
Income taxes consist of taxes currently due plus deferred taxes related to net
operating loss carryforwards and to differences between the financial statement
and tax bases of assets and liabilities. Deferred tax assets and liabilities
represent the future tax return consequences of these temporary differences,
which will either be taxable or deductible when the assets and liabilities are
recovered or settled.
F-10
<PAGE>
INTERALLIED GROUP, INC. AND SUBSIDIARIES
Notes to Financial Statements
Unaudited With Respect to September 30, 1999 and
for the Nine-Month Periods Ended September 30, 1999 and 1998
NOTE F - INCOME TAXES (CONTINUED)
A reconciliation of the income tax benefit computed at the federal statutory tax
rate to income tax benefit reflected in the financial statements is as follows:
<TABLE>
<CAPTION>
Nine Months Ended Year Ended
September 30, December 31,
-------------------- -----------------
1999 1998 1998 1997
-------- -------- ------- ------
<S> <C> <C> <C> <C>
Federal tax benefit at statutory income tax rate (34)% (34)% (34)% (34)%
Increases (reductions) resulting from:
State and local income tax, net of federal effect (6) (6) (6) (6)
Increase in valuation allowance 40 40 40 40
------- -------- ------ ------
Income tax benefit reflected in financial statements 0% 0% 0% 0%
======= ======== ====== ======
</TABLE>
The net deferred tax asset is comprised of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---------------- --------------
<S> <C> <C>
Net operating loss carryforward $ 335,000 $ 313,000
Valuation allowance (335,000) (313,000)
------------- -------------
Net deferred tax asset $ 0 $ 0
============= =============
</TABLE>
As of December 31, 1998 the Company had a NOL carryforward of $782,500, which
expires from 2011 through 2018. The Company has provided a valuation allowance
offsetting the deferred tax asset since management could not determine that it
was more likely than not that the deferred tax asset would be realized in the
future. The valuation allowance increased by $105,900 and $110,800 for the years
ended December 31, 1998 and 1997, respectively and increased by $22,000 for the
nine months ended September 30, 1999. The Company's ability to utilize its NOL
carryforward for federal income tax purposes in the future may be limited by the
provisions of Section 382 of the Internal Revenue Code regarding certain changes
in ownership.
NOTE G - STOCKHOLDERS' EQUITY
[1] Offering of common stock:
On June 17, 1996, the Company commenced a sale under Rule 504 of
Regulation D of 96,000 shares of common stock to a limited number of
accredited investors at price of $10 per share. The Company agreed that
the common stock purchased may be paid by cash or by short term eight
percent notes fully secured by marketable securities of the purchasers
and due 120 days from the date of sale. During the year ended December
31, 1996, the entire 96,000 shares of common stock were subscribed,
however, during the year ended December 31, 1998, 59,750 of such shares
(together with additional shares issued as a stock dividend totaling
11,950 shares) were rescinded for nonpayment of the related notes.
F-11
<PAGE>
INTERALLIED GROUP, INC. AND SUBSIDIARIES
Notes to Financial Statements
Unaudited With Respect to September 30, 1999 and
for the Nine-Month Periods Ended September 30, 1999 and 1998
NOTE G - STOCKHOLDERS' EQUITY (CONTINUED)
[2] Stock dividend:
On February 3, 1997, the Company declared and issued 53,538 shares of
common stock representing a 20% stock dividend. As the Company had an
accumulated deficit, the dividend was charged to additional paid-in
capital.
[3] Offering of common stock:
On September 29, October 30, and November 20, 1998, the Company commenced
additional sales under Rule 504 of Regulation D, of 740,000, 145,000 and
27,725 shares, respectively, of common stock to a limited number of
accredited investors and certain debt holders of the Company at prices of
$.20, $1.00 and $1.00 per share, respectively. Total proceeds, in the
form of cash, repayment of amounts due the subscribers and services
provided, were $148,000, $145,000 and $27,725, respectively.
NOTE H - ACQUISITION OF SUBSIDIARY
During March 1999, the Company acquired all of the outstanding stock of Dining
Experience, Inc. in return for the issuance of 500,000 shares of the Company's
common stock valued at $250,000. Dining Experience, Inc., which was formed in
December 1998, has developed a unique marketing concept for its products which
will involve sales through a network of independent participants in a
multi-level marketing program. As its original product and concept, it has
developed a gourmet meal of the month program delivered fresh to the purchaser's
home via overnight carrier. It is anticipated that Dining Experience, Inc. will
commence operations in the first quarter of 2000. As Dining Experience, Inc. is
in the development stage, the transaction has been accounted for as the
acquisition of assets, the principal asset being an intangible valued at
$266,865 which is being amortized on a straight-line basis over thirty-six
months. Amortization for the nine months ended September 30, 1999 totaled
$44,478. Liabilities of the acquired company at date of acquisition, which
exceeded tangible assets (consisting principally of cash, receivables and fixed
assets) by $16,865, amounted to $60,224, including $50,000 of notes payable
bearing interest at 9% and due in March 2000. Subsequent to the acquisition, an
additional $25,000 was loaned to Dining Experience, Inc. on the same terms.
NOTE I - LEASES
During May 1995, the Company entered into an operating lease for office space
which expires on May 1, 2000. Rent expense under this operating lease for the
years ended December 31, 1998 and 1997 amounted to $4,500 and $6,300,
respectively. As of December 31, 1998 future minimum rentals payable under the
lease are $6,300 in 1999 and $2,100 in 2000.
During January 1999, the Company entered into a month-to-month operating lease
for office space at a monthly rental of $850 from a company owned by the wife of
a party who became a significant stockholder of the Company during March 1999.
F-12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contaings financial information extracted from Balance Sheet,
Statement of Operations, Statement of Cash Flows and Notes thereto incorporated
in Part I, Item 13 of this Form 10SB and is qualified in its entirety by
reference to such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-3-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,348
<SECURITIES> 0
<RECEIVABLES> 69,611
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 71,959
<PP&E> 18,137
<DEPRECIATION> 0
<TOTAL-ASSETS> 312,483
<CURRENT-LIABILITIES> 154,309
<BONDS> 0
16,613
0
<COMMON> 0
<OTHER-SE> 1,280,874
<TOTAL-LIABILITY-AND-EQUITY> 312,483
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 231,180
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (473)
<INCOME-PRETAX> (54,773)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (54,773)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
