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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
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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-QSB
or any amendment to this Form 10-QSB. /X/
Issuer had no revenues for its most recent fiscal year.
As of September 30, 2000, ___________ shares of the registrant's common
stock were issued and outstanding.
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
Condensed Consolidated Balance Sheet at September 30, 2000
Condensed Consolidated Statements of Operations
for the Nine Months Ended September 30, 2000
Condensed Consolidated Statements of Operations
for the Three Months Ended September 30, 2000
Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 2000
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operation
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INTERALLIED GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheet -- Unaudited
September 30, 2000
ASSETS
Current assets:
Cash $ 1,061
Other receivables 2,480
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Total current assets 3,541
Fixed assets, net 11,332
Intangible asset, net 133,432
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$ 148,305
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 34,643
Notes payable and accrued interest 115,413
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Total current liabilities 150,056
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Commitment
Stockholders' equity:
Preferred stock; $.001 par value; 5,000,000 shares authorized;
no shares issued
Common stock; $.01 par value; 20,000,000 shares authorized;
1,722,993 shares issued and outstanding 17,230
Additional paid-in capital 1,311,105
Stock subscription receivable (10,000)
Accumulated deficit (1,320,086)
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(1,751)
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$ 148,305
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See Notes to Condensed Consolidated Financial Statements
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Condensed Consolidated Statements of Operations -- Unaudited
<TABLE>
<CAPTION>
Nine months ended
September 30,
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2000 1999
--------------------------
<S> <C> <C>
General, administrative and other operating expenses $ 116,740 $ 186,702
Amortization of intangible asset 66,716 44,478
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Loss before other income (expense) and minority Interest (183,456) (231,180)
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Other income (expense):
Gain on sale of subsidiary 68,051 176,880
Interest income 884
Interest expense (4,986) (473)
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63,949 176,407
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Net loss $ (119,507) $ (54,773)
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Net loss per share - basic and diluted $ (.07) $ (.04)
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Weighted average shares outstanding 1,722,993 1,494,630
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</TABLE>
See Notes to Condensed Consolidated Financial Statements
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Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three months ended
September 30,
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2000 1999
--------------------------
<S> <C> <C>
General, administrative and other operating expenses $ 11,320 $ 50,782
Amortization of intangible asset 22,239 22,239
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Loss before other income (expense) and minority Interest (33,559) (73,021)
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Other income (expense):
Interest income 527 (1,832)
Interest expense (1,551) 927
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(1,024) (905)
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Net loss $ (34,583) $ (73,926)
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Net loss per share - basic and diluted $ (.02) $ (.05)
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Weighted average shares outstanding 1,722,993 1,494,630
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</TABLE>
See Notes to Condensed Consolidated Financial Statements
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Condensed Consolidated Statements of Cash Flows - Unaudited
<TABLE>
<CAPTION>
Nine months ended
September 30,
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2000 1999
----------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(119,507) $ (54,773)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 71,702 46,546
Gain on sale of subsidiary (176,880)
Changes in:
Other receivables (489) (7,869)
Accounts payable and accrued expenses 9,552 (18,050)
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Net cash used in operating activities (38,742) (211,026)
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Cash flows from investing activities:
Proceeds from sale of subsidiary 15,980 130,908
Purchase of fixed assets (1,924)
Net cash acquired in connection with acquisition of subsidiary 14,559
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Net cash provided by investing activities 15,980 143,543
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Cash flows from financing activities:
Advances from stockholders 21,754 36,550
Proceeds from notes payable 25,000
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Net cash provided by financing activities 21,754 61,550
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Net decrease in cash (1,008) (5,933)
Cash, beginning of period 2,069 8,281
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Cash, end of period $ 1,061 $ 2,348
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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 Condensed Consolidated Financial Statements
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 September 30, 2000, the Company
had a working capital deficiency of $146,515. For the nine months ended
September 30, 2000, the Company incurred a net loss of $119,507.
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 Condensed 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 Condensed 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 Condensed consolidated
financial statements include all adjustments necessary in order to make the
Condensed consolidated financial statements not misleading. The results of
operations for the nine 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.
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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
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
totaling $74,566 to date, amounting to $36,583 for the nine months ended
September 30, 2000 and $21,971 for the nine months ended September 30, 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.
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 near future. 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, 2000 and 1999 totaled $66,716 and $44,478,
respectively. 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 on demand. Subsequent to the
acquisition, an additional $25,000 was loaned to Dining Experience, Inc. on the
same terms.
Management's Discussion and Analysis or Plan of Operation.
Introduction
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.
After the meal-of-the-month program is launched, the Company plans to
offer different types of meals and to develop additional products and services
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involving gourmet food items, including the development of food seminars to
enhance the Dining Experience marketing program.
Statement of Operations September 30, 2000 to September 30, 1999 (Unaudited)
During the first nine months of 1999 and 2000, the Company had no
revenue producing operations. During the three months ended September 30, 2000,
the Company's general, administrative and other operating expenses were $11,320
compared to $50,782 for the three months ended September 30, 1999. During the
nine months ended September 30, 2000, the Company's general, administrative and
other operating expenses were $116,740 compared to $186,702 for the nine months
ended September 30, 1999. Most of these expenses in 2000 and 1999 were incurred
in connection with start-up activities of Dining Experience. Expenses in nine
months ended September 30, 2000 and 1999 also included a non-cash expense of
$66,716 and $44,478, respectively, 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
51% interest in the joint venture 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. Because cumulative losses exceeded the Company's basis, the
Company did not record any loss related to its investment in its 25% minority
interest in another joint venture owning a "Place for Ribs" in Rochester, New
York. The Company had a net loss of ($34,583) for the three months ended
September 30, 2000 as compared to a net loss of approximately ($73,926) for the
three months ended September 30, 1999. The Company had a net loss of ($119,507)
for the nine months ended September 30, 2000 due to the fact that its losses
before other income were offset by only approximately $68,000 of gain from the
sale of its 51% Buffalo joint venture in the year 2000 compared to an
approximately $177,000 gain the prior year as compared to a net loss of
approximately ($54,773) for the nine months ended September 30, 1999. The
increase is attributable to the sale of its 51% interest in its Buffalo joint
venture.
Interest expense was $(1,551) for the three months ended September 30,
2000 as compared with $927 for the three months ended September 30, 1999.
Interest income was $527 for the three months ended September 30, 2000
as compared with interest income of ($1,832) for the three months ended
September 30, 1999.
Interest expense was $4,986 for the nine months ended September 30,
2000 as compared with $(473) for the nine months ended September 30, 1999.
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 from the sale of its 51% interest in the Buffalo joint venture
of which $50,000 was received prior to its acquisition.
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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: November 17, 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.
Signature Title Date
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/s/ Ira Keeperman President, Chief Executive Officer November 17, 2000
------------------- Financial and Accounting Officer
Ira Keeperman
/s/ Patrice Croghan Secretary/Treasurer November 17, 2000
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Patrice Croghan
/s/ Maureen Sirull Vice President November 17, 2000
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Maureen Sirull
