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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
OR
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934.
For the transition period from __________ to __________ .
Commission file number 000-28131
INTERALLIED GROUP, INC.
(Name of Small Business Issuer in Its Charter)
Nevada 14-1775226
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1 Jacqueline Street
Suite 102
New Windsor, New York 12553
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(Address of Principal Executive Offices)
(914) 534-4909
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange on Which Registered
- ------------------- -----------------------------------------
Not Applicable Not Applicable
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.01 per share
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 past 90 days. Yes ___X___
No _______
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [_X_]
Issuer had no revenues for its most recent fiscal year.
As of April 21, 2000, 1,722,973 shares of the registrant's common stock
were issued and outstanding, and the aggregate market value of such shares held
by non-affiliates of the registrant on such date, based on the average of the
closing bid and asked prices for such shares on such date, was approximately
$5,948,108.
Transitional Small Business Disclosure Format:
Yes /_ _/ No /_X_/
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INTERALLIED GROUP, INC.
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 2000 1
Consolidated Statements of Operations
for the Three Months Ended March 31, 2000 2
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2000 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-7
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INTERALLIED GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet -- Unaudited
March 31, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash $ 21,462
Note receivable 4,035
Other receivables 2,043
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Total current assets 27,540
Fixed assets, net 14,656
Intangible asset, net 177,910
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$ 220,106
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 28,567
Notes payable and accrued interest 96,061
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Total current liabilities 124,628
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Commitment
Stockholders' equity:
Preferred stock; $.001 par value; 5,000,000 shares authorized;
no shares issued
Common stock; $.01 par value; 20,000,000 shares authorized;
1,722,993 shares issued and outstanding 17,230
Additional paid-in capital 1,311,105
Stock subscription receivable (10,000)
Accumulated deficit (1,222,857)
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95,478
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$ 220,106
=============
</TABLE>
See notes to condensed consolidated financial statements -1
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INTERALLIED GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations -- Unaudited
<TABLE>
<CAPTION>
Three months ended
March 31,
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2000 1999
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<S> <C> <C>
General, administrative and other operating expenses $ 66,518 $ 82,255
Amortization of intangible asset 22,238
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Loss before other income (expense) and minority Interest (88,756) (82,225)
----------- -----------
Other income (expense):
Gain on sale of subsidiary 68,051 176,880
Interest income 292 1,611
Interest expense (1,865)
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66,478 178,491
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Net income (loss) $ (22,278) $ 96,266
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Net income (loss) per share - basic and diluted $ (.01) $ .08
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Weighted average shares outstanding 1,722,993 1,161,297
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</TABLE>
See notes to condensed consolidated financial statements -2
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INTERALLIED GROUP, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------------
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (22,278) $ 96,266
Adjustments to reconcile net income (loss) to net cash provided by
Depreciation and amortization 23,900 76
Gain on sale of subsidiary (176,880)
Changes in:
Other receivables (52) 3,630
Accounts payable and accrued expenses 5,878 (24,878)
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Net cash provided by (used in) operating activities 7,448 (101,786)
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Cash flows from investing activities:
Proceeds from sale of subsidiary 11,945 106,541
Net cash acquired in connection with acquisition of subsidiary 14,559
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Net cash provided by investing activities 11,945 121,100
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Cash flows from financing activities:
Advances from stockholders (10,028)
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Net cash provided by financing activities (10,028)
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Net increase (decrease) in cash 19,393 9,286
Cash, beginning of period 2,069 8,281
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Cash, end of period $ 21,462 $ 17,567
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Supplemental disclosures of noncash activities:
Issuance of stock for acquisition of subsidiary $ 250,000
Note received in connection with sale of subsidiary $ 61,449
</TABLE>
See notes to financial statements -3
<PAGE>
INTERALLIED GROUP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements -- Unaudited
March 31, 2000
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. The Company
continues to hold a 25% interest in a second franchised restaurant which was
acquired in 1997. During March 1999, the Company acquired Dining Experience,
Inc., a development stage marketing company.
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. At March 31, 2000, the Company had
a working capital deficiency of $97,088. For the three months ended March 31,
2000, the Company incurred a net loss of $22,278.
The Company has been heavily reliant on financial support from stockholders to
assist in meeting its cash flow needs. Management plans to continue, and expects
to ultimately complete, the Company's development of Dining Experience, Inc. as
a viable business concept. Additionally, management is seeking additional
sources of capital, and anticipates controlling costs at levels sufficient to
complete development activities, and ultimately to achieve sales volumes that
are sufficient to support the Company's cost structure. The Company expects to
receive additional financial support from its stockholders while it seeks other
sources of capital.
The Company's continuation as a going concern is dependent on its ability to
complete the development of Dining Experience, Inc. discussed in the preceding
paragraph and ultimately to attain profitable operations. However, no assurance
can be given as to whether the Company will be able to achieve these objectives.
These factors, among others raise substantial doubt about the Company's ability
to continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or the amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern for a reasonable
period of time.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
[1] 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 wholly owned subsidiary
Interallied Group, Ltd. 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.
[2] Interim financial information:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with 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 the interim
consolidated financial statements include all adjustments necessary in
order to make the consolidated financial statements not misleading. The
results of operations for the three months ended are not necessarily
indicative of the results to be expected for the full year. For further
information, refer to the Company's consolidated financial statements
and footnotes thereto at December 31, 1999, included in the Company's
annual report on Form 10-KSB.
NOTE C - 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
-4
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INTERALLIED GROUP, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements -- Unaudited
March 31, 2000
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 $11,477 for the three months ended March 31, 2000 and $5,227 for
the three months ended March 31, 1999, 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.
NOTE D - 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 bore interest at 5.75% per annum. The
balance of the note and accrued interest totaled $30,848 at 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 for the three months ended March 31,
1999.
NOTE E - 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
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 fourth 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 three months ended March 31, 2000 totaled $66,717. 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 to stockholders 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.
-5
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Management's Discussion and Analysis or Plan of Operation.
Plan of Operation
During the year 2000, the Company will continue to focus on launching
the gourmet meal-of-the-month program to be sponsored by its subsidiary, Dining
Experience. Prior to its acquisition by the Company, Dining Experience had begun
and is continuing to develop this program by:
o entering into arrangements with participating restaurants;
o developing its membership and multi-level marketing programs;
o developing marketing and promotional material; and
o entering into arrangements for the distribution of meals of the
month.
The market for the Company's food programs will depend in large part on
the number of member-marketers that enroll. The Company intends to attract
members to its gourmet meal-of-the-month program on the basis of a multi-level
marketing plan, which will enable each member to earn income based upon its
enrollment of other members and their purchasing levels. The quality, number and
location of the restaurants that participate in the program will also affect the
Company's ability to attract members, as will the number, location, and quality
of products or services provided by other merchants that participate in the
program by providing discounts to members on these products and services. To
date, 76 member-marketers have enrolled in this program, and 12 restaurants have
agreed to become participants in the gourmet meal-of-the-month program. These
restaurants offer Italian, Spanish or Continental cuisine. See Item 1 "Business
- - Competition." Operations of the gourmet-meal-of-the-month program are intended
to commence in the fourth quarter of 2000.
After the gourmet-meal-of-the-month program is launched, the Company
plans to offer different types of meals and to develop additional products and
services involving gourmet food items, including the development of food
seminars to enhance the Dining Experience marketing program. See Item 1 -
Business - Dining Experience" and "Business - Future Plans.
Three Months Ended March 31, 2000 Compared to the Year Ended March 31, 1999
Results of Operations
The Company's only operation is its 25% interest in another "Place For
Ribs" restaurant, which has generated losses since inception in 1997.
During the three months ended March 31, 2000, the Company's general,
administrative and operating expenses were $66,518 compared to $82,255 for the
three months ended March 31, 1999. Most of these expenses in 2000 and 1999 were
incurred in connection with start-up activities of Dining Experience. Expenses
in 2000 also included a non-cash expense of $22,238 for amortization of
acquisition costs for Dining Experience. In January 1999 and 2000, the Company
experienced a non-recurring gain of $176,880 and 68,051, respectively from the
sale of its interest in the joint venture. Because cumulative losses exceeded
the Company's basis, the Company did not record any loss related to its
investment in its 25% minority interest. The Company had a net loss of ($22,278)
for the three months ended March 31, 2000 as compared to a net gain of
approximately $96,266 for the three months ended March 31, 1999. The decrease is
attributable to the sale of its 51% interest in a joint venture, which was
formed as a limited liability company to operate a "Place for Ribs" restaurant
under a franchise agreement in Buffalo, New York. This entity was under the
name, Interallied Restaurant Group of Buffalo, LLC.
Interest expense was ($1,865) for the three months ended March 31, 2000
as compared with no interest expense for the three months ended March 31, 1999.
Interest income was $292 for the three months ended March 31, 2000 as
compared with interest income of $1,611 for the three months ended March 31,
1999.
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Liquidity
The Company has not been able to pay its obligations in the normal
course and the Company's financial statements included herein are subject to a
going concern condition. The Company must receive additional capital to continue
its existence and commence the operations of Dining Experience.
The Company has historically experienced negative cash flow from
operations, and has covered cash flow short falls through advances made by
certain shareholders and sales of common stock. In 1999 Dining Experience
received $75,000 of which $50,000 was received prior to its acquisition.
For information concerning the Company's results of operations for the
last two fiscal years, see the Company's financial statements for those years
and the notes to those statements contained elsewhere in this report. It should
be noted that shortly after selling its interest in the restaurant joint venture
effective December 1998, the Company acquired Dining Experience and began to
concentrate on the development of this subsidiary's prospective business.
Consequently, year-to-year comparisons of financial information for 1999 and
1998 may not be useful to an understanding of the Company's current financial
condition.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Dated: May 22, 2000
INTERALLIED GROUP, INC.
By: /s/ Ira Keeperman
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Ira Keeperman, President, Chief Executive
Officer
In accordance with the Exchange Act, this report has been signed below
by the following person on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Ira Keeperman President, Chief Executive Officer May 22, 2000
- ------------------- Financial and Accounting Officer
Ira Keeperman
/s/ Patrice Croghan Secretary/Treasurer May 22, 2000
- -------------------
Patrice Croghan
/s/ Maureen Sirull Vice President May 22, 2000
- ------------------
Maureen Sirull
</TABLE>
-7-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from Balance Sheet,
Statement of Cash Flows and Notes thereto incorporated in Part I, Item 1 of this
Form 10-QSB and is qualified in its entirety by reference to such financial
statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 21,462
<SECURITIES> 0
<RECEIVABLES> 6,078
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 27,540
<PP&E> 14,656
<DEPRECIATION> 0
<TOTAL-ASSETS> 220,106
<CURRENT-LIABILITIES> 124,628
<BONDS> 0
0
0
<COMMON> 17,230
<OTHER-SE> 78,248
<TOTAL-LIABILITY-AND-EQUITY> 220,106
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 88,756
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 292
<INCOME-PRETAX> (22,278)
<INCOME-TAX> 0
<INCOME-CONTINUING> (22,278)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,278)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
