United States
Securities and Exchange Commission
Washington, D.C. 20549
------------------------------
Form 10 QSB
( X ) Quarterly Report pursuant to Section 13 or 15 ( d )
of the Securities Exchange Act of 1934
For the Quarterly Period Ended July 31st, 2000
( ) Transition Report pursuant to Section 13 or 15 ( d )
of the Securities Exchange Act of 1934
--------------------------------
Commission File Number 0-9848
Initio, Inc.
(Exact name of small business registrant as specified in its charter)
Nevada 22-1906744
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No. )
2500 Arrowhead, Drive, Carson City, Nevada 89706
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (775) 883 5469
Indicate by check mark whether the registrant ( 1 ) has filed all
reports required to be filed by Section 13 or 15 ( d ) of the
Securities Exchange Act of 1934 during the preceding 12 months ( or
for such shorter period the registrant was required to file such
reports), and ( 2 ) has been subject to such filing requirements for
the past 90 days. Yes X No
The number of shares outstanding of the registrant's common stock as
of
September 10th, 2000 was 4,645,004
Transitional Small Business Disclosure Format Yes No X
Initio, Inc.
Form 10-QSB
For the Quarter Ended July 31, 2000
Contents
Part I. Financial Information
Page
Item 1. Financial Statements
a) Consolidated Statements of Operations and Comprehensive Income
(Loss) for the Three
Months Ended July 31st, 2000 and 1999 1.
b) Consolidated Balance Sheets as of July 31st, 2000 and
April 30th, 2000 3.
c) Consolidated Statements of Cash Flows for the Three
Months Ended July 31st, 2000 and 1999 5.
d) Notes to Financial Statements 7.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8K
a) Exhibit 27 10.
Signatures 12.
Initio, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
For the three months ended
(Unaudited)
July 31, 2000 July 31, 1999
Revenues:
Interest and dividends $88,263 $100,243
Gain on the sale of marketable securities 58,194 43,793
Rental income 38,000 84,000
Other - 18,355
184,457 246,391
Expenses:
General and administrative 116,163 146,234
Interest 50,617 81,688
166,780 227,922
Income from continuing operations
before income (taxes) benefit 17,677 18,469
Income tax (expense) benefit:
Current (620)
Deferred (5,580) 920,000
Income from continuing operations 11,477 938,469
Gain on sale of discontinued operations, net of
income taxes of $ 884,000 - 1,503,986
Net income 11,477 2,442,455
Other Comprehensive Income (loss):
Unrealized Gains (losses) on
Marketable Securities:
Arising during the period (106,652) (53,920)
Reclassification of Gains Realized in
Other Income (11,390) (48,516)
(118,042) (102,436)
Comprehensive income (loss) $ (106,565) $ 2,340,019
The accompanying notes are an integral part of these financial statements.
1.
Initio, Inc.
Consolidated Statements of Operations and Comprehensive Income(Loss)(continued)
For the three months ended
(Unaudited)
July 31, 2000 July 31, 1999
Income per Common Share:
Basic:
Continuing operations $0.00 $0.20
Income from discontinued
operations - 0.32
Net income $0.00 $0.52
Diluted:
Continuing operations $0.00 $0.19
Income from discontinued
operations - 0.30
Net income $0.00 $0.49
Weighted Average Shares:
Basic 4,645,004 4,666,616
Diluted 4,976,103 4,991,491
The accompanying notes are an integral part of these financial statements.
2.
Initio, Inc.
Consolidated Balance Sheets
As of
July 31, 2000 April 30, 2000
(Unaudited) (Audited)
Assets
Cash $631,262 $550,025
Marketable securities 2,598,897 2,938,282
Deferred tax asset 1,256,182 1,261,762
Building and improvements, net - 1,493,120
Vehicles and equipment, net 25,291 24,155
Building held for sale 1,493,120 -
Convertible debenture 3,000,000 3,000,000
Notes receivable 424,752 426,841
Other assets 106,264 44,471
Total assets $9,535,768 9,738,656
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued expenses 92,486 109,286
Income taxes payable 5,120 45,000
Mortgage payable 813,934 825,577
Other liabilities - 28,000
Subordinated convertible debenture 1,500,000 1,500,000
Total liabilities 2,411,540 2,507,863
Commitments
Stockholders' Equity
Common Stock, $ .01 par value, Authorized
10,000,000 shares, 5,052,575 issued and
4,645,004 outstanding shares 50,526 50,526
Additional paid in capital 8,652,670 8,652,670
Accumulated deficit (1,000,471) (1,011,948)
Accumulated other comprehensive income (760) 117,282
7,701,965 7,808,530
Less: Treasury stock, 407,571
common shares (577,737) (577,737)
Total stockholders' equity 7,124,228 7,230,793
Total liabilities and stockholders' equity $9,535,768 $9,738,656
The accompanying notes are an integral part of these financial statements.
3.
Initio, Inc.
Consolidated Statements of Cash Flows
For the three months ended
(Unaudited)
July 31, 2000 July 31, 1999
Cash Flows from Operating Activities
Net income $ 11,477 $2,442,455
Adjustments to reconcile net income to net
cash (used in) operating activities:
Gain on sale of discontinued operations - (1,503,986)
Gain on sale of marketable securities (58,194) (43,793)
Depreciation and amortization 1,681 24,913
Deferred tax expense (benefit) 5,580 (920,000)
Net increase in net assets of discontinued oper - (282,578)
Net increase in other assets (61,793) (175,777)
Net increase (decrease) in other liabilities (84,680) 109,928
Net cash (used in) operating activities (185,929) (348,838)
Cash flows from Investing Activities
Proceeds from sale of discontinued operations - 552,328
Proceeds from sale of Peabody facility - 253,080
Purchases of property and equipment (2,817) (37,927)
Net proceeds from sales/(purchases) of
marketable securities 279,537 (133,687)
Proceeds from collection of notes receivable 2,089 1,526
Net cash provided by investing activities 278,809 635,320
Cash Flows from Financing Activities
Mortgage repayment (11,643) (14,264)
Net cash (used in) financing activities (11,643) (14,264)
Net increase in Cash 81,237 272,218
Cash at beginning of period 550,025 1,182,993
Cash at end of period $631,262 $1,455,211
The accompanying notes are an integral part of these financial statements.
4
Initio, Inc.
Consolidated Statements of Cash Flows (continued):
For the three months ended
(Unaudited)
April 30, 2000 July 31, 1999
Supplemental disclosures:
Cash paid during the period for:
Interest $ 49,479 $ 57,213
Income taxes 40,500 -
Non-Cash Investing and Financing Activities:
Non-cash proceeds received in exchange for
assets of discontinued operations:
Receipt of Convertible Debenture - 3,400,000
Repayment of Subordinated Convertible Debenture - 2,000,000
Receipt of mortgage receivable - 275,000
-
Exchange of employee stock for note receivable - 25,550
Increase (decrease) in fair value of available- $ (106,652) (53,920)
for-sale securities
The accompanying notes are an integral part of these financial statements.
5
Initio, Inc.
Notes to Financial Statements
Basis of Consolidation:
The consolidated financial statements include the accounts of Initio,
Inc. and its wholly owned subsidiary Initio Acquisition Corp.
(formerly named Deerskin Trading Post, Inc.), hereinafter collectively
referred to as the "Company". All material intercompany transactions
and balances have been eliminated. Certain prior period amounts have
been reclassified to conform with current period presentation.
Use of Estimates:
Preparing financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses and consequently stockholders'
equity. Examples include estimates of future revenues and expenses.
Actual results may differ from these estimates.
BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information in response to the requirements of
Article 10 of Regulation S-X. 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 accompanying unaudited financial statements
contain all adjustment (consisting only of normal recurring items)
necessary to present fairly the financial position as of July 31st,
2000; results of operations for the three months ended July 31st,
2000, and 1999; cash flows for the three months ended July 31st, 2000
and 1999; for further information, refer to the Company's financial
statements and notes thereto included in the Company's Form 10-KSB for
the year ended April 30th, 2000. The Balance sheet at April 30th,
2000 was derived from the audited financial statements as of that
date. Results of Operations for interim periods are not necessarily
indicative of annual results of operations.
Income per Share:
Basic Income per Common Share has been computed based upon the
weighted average number of actually outstanding shares of the
Company's common stock. Diluted Income per Common Share includes
common shares associated with certain outstanding employee stock
options and a portion of the Company's subordinated convertible
debenture.
6.
Initio, Inc.
Notes to Financial Statements
(Continued)
Recently Issued Accounting Standards:
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts. As of July 31,
2000, this pronouncement would have no effect on the accompanying
financial statements.
7.
RECENT EVENTS
Item 2. Management's Discussion and Analysis of Financial Condition
and the Results of Operations.
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition. The
discussion should be read in conjunction with the Company's Financial
Statements and Notes thereto.
Management's discussion and analysis contains "forward-looking
statements" about the Company's future prospects. These statements
are subject to risks and uncertainties, which could cause actual
results to differ materially from those expected by Management.
Readers are therefore cautioned not to rely upon any such forward-
looking beliefs or judgements in making investment decisions.
Results of Operations:
As of April 30, 1999 the Company sold substantially all of the
operating assets of its catalog business. In May 1999 the Company sold
its facility in Peabody, Massachusetts to an unrelated party. These
transactions resulted in a gain, net of income taxes of approximately
$1,500,000. Since that time the Company has been in the process of
identifying new business opportunities.
The Company's revenues, excluding gains on the sale of marketable
securities which are transactional in nature and vary from period to
period, decreased by approximately $76,000 during the quarter. The
decrease was primarily attributable to the termination of the lease
for the Company's Nevada facility and the termination of management
fee income from the buyer of the Company's catalog business. The
Company's general, administrative and interest expenses decreased by
approximately $ 61,000.
In the period ended July 31st, 1999, the Company recorded a gain on
the sale of discontinued operations of $1,503,986 (net of income
taxes). No such gain was recorded in the current period. As a
consequence of the foregoing the company reported net income in the
period ended July 31st, 2000 of $11,477 versus $2,442,455 in the
period ended July 31st, 1999.
On July 20th, 2000 the Company entered into a merger agreement with
IncuLab, Inc. ( a Delaware Corporation). IncuLab is a company, which
provides services to and invests in high tech early stage companies
and is in the process of building a high tech launch center in
Manhattan, which will market space as well as professional consulting
and financial services to internet and other high tech early stage
companies.
8.
Item 2. Management's Discussion and Analysis of Financial Condition
and the Results of Operations (Continued).
The merger agreement provides that Initio will have a 2 for 3 reverse
split and thereafter will issue approximately 27,870,000 shares of the
common stock of Initio, Inc. so that immediately after such merger the
former shareholders of IncuLab shall own approximately 90% of the
issued and outstanding shares and the other Initio, Inc. shareholders
shall own 10% thereof.
Liquidity and Capital Resources:
In May, 1999, when the sale of its catalog operations was consummated,
the Company received approximately $ 552,000 in cash, a $ 3,400,000
convertible debenture of the purchaser and was released from $
2,000,000 of its subordinated debentures. Additionally, in connection
with the sale of its Peabody, Massachusetts facility in May, 1999, the
Company received approximately $ 253,000 in cash and a $ 275,000
mortgage note from the purchaser.
As of July 31st , 2000 the Company had approximately $ 3,230,159 in
cash and marketable securities.
The sale in May, 1999 of the Company's catalog operations also reduced
its long-term liability on the subordinated debenture from $ 3,500,000
to $ 1,500,000. As of July 31, 2000 the Company's liabilities,
excluding the subordinated debenture and the mortgage payable, was
approximately $ 98,000.
9.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
27. Financial Data Schedule
(B ) Reports on Form 8-K
Initio, Inc. filed no reports on Form 8-K during the quarter ended
July 31st, 2000.
Items 1,2,3,4 and 5 are not applicable and have been omitted.
10.
Exhibit 27
This schedule contains summary information extracted from the
Company's accompanying audited financial statements and is qualified
in its entirety by reference to such financial statements.
Period Three Months 12 Months
Period End July 31, 2000 April 30, 2000
Cash $ 631,262 $ 550,025
Securities 2,598,897 2,938,282
Receivables - -
Allowances - -
Inventory - -
Current assets n/a n/a
Property and Equipment 58,755 2,131,182
Accumulated Depreciation 33,464 613,907
Total Assets 9,535,768 9,738,656
Current Liabilities n/a n/a
Bonds 1,500,000 1,500,000
Preferred 0 0
Common 50,526 50,526
Other Stockholders Equity 7,073,702 7,180,267
Total Liabilities & Stockholders'
Equity 9,535,768 9,738,656
Income 184,457 1,061,115
Cost of Goods Sold - -
Other Expenses 116,163 676,812
Interest Expense 50,617 234,543
Net Income 11,477 2,814,360
Basic Income Per Share 0.00 0.61
Diluted Income Per Share 0.00 0.57
11.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Initio, Inc.
Date: September 11th, 2000 By: /s/ Martin Fox
Martin Fox
President and Office of the
Chief Executive
By: /s/ Daniel DeStefano
Daniel DeStefano
Chairman of the Board and
Office of the Chief Executive
By: /s/ Martin Fox
Martin Fox
. President and Office of the
Chief Executive, Secretary, Treasurer
and Chief Financial
Officer
12.
