0001019056-01-500508.txt : 20011119 0001019056-01-500508.hdr.sgml : 20011119 ACCESSION NUMBER: 0001019056-01-500508 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010831 FILED AS OF DATE: 20011106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DONINI INC CENTRAL INDEX KEY: 0001129900 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 223768426 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-32133 FILM NUMBER: 1775451 BUSINESS ADDRESS: STREET 1: 4555 BOUL DES GRANDES PRAIRIES #30 STREET 2: ST LEONARD CITY: MONTREAL QUE ZIP: H1R 1A5 BUSINESS PHONE: 9732264600 MAIL ADDRESS: STREET 1: 425 EAGLE ROCK AVENUE STREET 2: SUITE 200 CITY: ROSELAND STATE: NJ ZIP: 07068 FORMER COMPANY: FORMER CONFORMED NAME: PRS SUB VI INC DATE OF NAME CHANGE: 20001213 10QSB/A 1 donqsb.txt FORM 10QSB/A U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB/A (Amendment No. 1) (Mark One) [X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended August 31, 2001 [ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to __________ Commission File Number 0-32133 DONINI, INC. (Exact Name of Small Business Issuer as Specified in Its Charter) New Jersey 22-3768426 (State or other jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 4555 boul, des Grandes Prairies, #30 St. Leonard, Montreal, Quebec, Canada H1R 1A5 (Address of Principal Executive Offices) (514) 327-6006 (Issuer's Telephone Number, Including Area Code) 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 issuer 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 each of the issuer's classes of common equity, as of August 31, 2001: 16,743,937 shares of common stock Transitional Small Business Disclosure Format (check one): Yes No X ----- ----- Donini, Inc. (A Development Stage Company) TABLE OF CONTENTS PART I Page ---- Item 1 - Financial Information (unaudited) Donini, Inc. Consolidated Balance Sheets as of August 31, 2001 and May 31, 2001.................................. 3-4 Consolidated Statements of Operations for the three month period ended August 31, 2001 and 2000 ................................... 5 Consolidated Statements of Cash Flows for the three month periods ended August 31, 2001 and 2000.................................... 6 Consolidated Statements of Stockholders' deficit and Comprehensive Income as of June 1, 1998, May 31, 1999, 2000 and 2001, and August 31, 2001................................ 7 Notes to Financial Statements (unaudited)................................. 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.................... 9 PART II Item 1 - Legal Proceedings................................................ 10 Item 2 - Changes in Securities and Use of Proceeds........................ 11 Item 3 - Defaults Upon Senior Securities.................................. 11 Item 4 - Submission of Matters to a Vote of Security Holders.............. 11 Item 6 - Exhibits and Reports on Form 8-K................................. 11 2 PART I Item 1 - Financial Information (unaudited)
DONINI INC. Consolidated Balance Sheet (Expressed in United States dollars) =============================================================================================== August 31, May 31, 2001 2001 ----------------------------------------------------------------------------------------------- Assets Current assets: Accounts receivable, net of allowance for doubtful accounts $ 50,269 $ 51,940 Income and sales taxes receivable 65,923 39,908 Current portion of balance of sales receivable 102,858 90,421 Due from Shareholder 58,763 0 Inventories 24,451 24,296 Prepaid expenses 8,114 8,175 Assets held for resale 81,940 169,065 ---------------------------------------------------------------------------------------- 392,318 383,805 Balance of sales receivable 278,821 207,546 Fixed assets 399,314 397,617 Trade Marks 12,329 12,375 ----------------------------------------------------------------------------------------------- $ 1,082,782 $ 1,001,343 ===============================================================================================
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DONINI INC Consolidated Balance Sheet (Expressed in United States dollars) =============================================================================================== August 31, May 31, 2001 2001 ----------------------------------------------------------------------------------------------- Liabilities and Shareholders' Deficit Current liabilities: Bank indebtedness $ 351,138 211,185 Accounts payable and accrued liabilities 1,066,242 1,054,188 Due to an employee, non-interest bearing and unsecured 27,520 28,370 Loans payable 44,758 54,351 Due to shareholder 0 22,445 Current portion of long-term debt 83,321 84,162 ---------------------------------------------------------------------------------------- 1,572,979 1,454,701 Long-term debt 208,390 171,459 Shareholder's deficit: Common stock, $0.001 par value: 100,000,000 shares authorized, 16,743,937 and 15,158,937 shares issued and outstanding at August 31, 2001 and May 31, 2001 respectively 16,744 15,159 Additional paid in capital 2,895,205 2,572,629 Deficit (3,729,214) (3,333,094) Accumulated other comprehensive income: Cumulative currency translation adjustment 118,678 120,489 ---------------------------------------------------------------------------------------- Total shareholders' deficit (698,587) (624,817) ---------------------------------------------------------------------------------------- $ 1,082,782 $ 1,001,343 ===============================================================================================
See accompanying notes to consolidated financial statement 4 DONINI INC. Consolidated Statement of Operations Three months period ended August 31, 2001and 2000 (Expressed in United States dollars) =============================================================================== 2001 2000 ------------------------------------------------------------------------------- Revenues: Sales $ 253,496 $ 189,525 Royalties and other related revenues 177,252 174,843 Order processing fees 66,984 64,430 Interest Income 6,342 5,580 ------------------------------------------------------------------------ 504,074 434,378 Cost of goods sold 170,655 122,524 Cost of supplies to franchises 2,255 24,791 ------------------------------------------------------------------------ 172,910 147,315 ------------------------------------------------------------------------ 331,164 287,063 Costs and expenses: Advertising and promotion 76,127 94,692 Salaries 91,461 66,691 General and administrative expenses 191,273 84,428 Depreciation 15,368 9,259 Interest Expense 29,444 16,664 Compensation costs 323,611 0 ------------------------------------------------------------------------ 727,284 271,734 ------------------------------------------------------------------------ Income (Loss) before income taxes $ (396,120) 15,329 Income Tax 0 0 Net income (loss) $ (396,120) 15,329 =============================================================================== Income (loss) per share Basic $ (.03) $ .00 =============================================================================== Weighted Average Shares Outstanding 15,193,393 10,000,000 =============================================================================== See accompanying notes to consolidated financial statements. 5 DONINI INC. Consolidated Statements of Cash Flows Three months ended August 31, 2001 and 2000 (expressed in United States dollars) =============================================================================== 2001 2000 ------------------------------------------------------------------------------- Cash flows from operating: Net income (loss) (396,120) 15,329 Adjustments for: Depreciation 15,368 9,259 Compensation expense 323,611 0 Foreign exchange (1,811) (20,109) Net increase (decrease) in allowance for doubtful accounts (248) 0 Net change in operating working capital items: Accounts receivable 1,919 (20,119) Income and sales tax receivable (26,015) (1,659) Due from shareholder (58,763) 0 Inventories (155) 1,972 Prepaid expenses 61 (32,351) Accounts payable and accrued liabilities 12,054 (158,036) Due to shareholder (22,445) 0 ------------------------------------------------------------------ (152,544) (205,714) Cash flows from financing activities: Bank indebtedness 139,953 (27,159) Repayments of amounts due to employee (850) 0 Proceeds of loans payable (9,593) 8,155 Repayment of loans payable 0 (14,830) Proceeds from long-term debt 40,000 411,126 Repayment of long-term debt (3,910) (99,758) Repayment of obligations under capital lease 0 (1,252) Exercise of stock options 550 0 ------------------------------------------------------------------------ 166,150 276,282 Cash flows from investing activities: Increase in balance of sales receivable (100,979) (50,970) Repayment of balance of sales receivable 17,267 7,494 Acquisition of fixed assets (17,065) (9,904) Trademarks 46 0 Assets held for resale 87,125 (17,188) ------------------------------------------------------------------------ (13,606) (70,568) =============================================================================== Net decrease in cash and cash equivalents 0 0 Cash and cash equivalents at beginning of the period 0 0 =============================================================================== Cash and cash equivalents at end of the period $ 0 $ 0 =============================================================================== 6
DONINI, INC. Consolidated Statement of Stockholders' Deficit and Comprehensive Income (expressed in United States dollars) =============================================================================================================== Additional Accumulated Common paid in comprehensive Stock capital Deficit income Total --------------------------------------------------------------------------------------------------------------- June 1, 1998 $ 10,000 $ 925,213 $(1,976,625) $ 41,293 $(1,000,119) Net loss (77,286) (77,286) Foreign currency adjustment 49,846 49,836 ------------ Total comprehensive income (27,440) --------------------------------------------------------------------------------------------------------------- May 31, 1999 10,000 925,213 (2,053,911) 91,139 (1,027,559) Net loss (249,730) (249,730) Foreign currency adjustment 26,612 26,612 ------------ Total comprehensive income (223,118) --------------------------------------------------------------------------------------------------------------- May 31, 2000 10,000 925,213 (2,303,641) 117,751 (1,250,677) Net loss (1,029,453) (1,029,453) Foreign currency adjustment 2,738 2,738 ------------ Total comprehensive income (1,026,715) Issuance of common shares 1,918 432,657 434,575 Conversion of debenture 2,207 497,793 500,000 Compensation expense -- 35,000 35,000 Conversion of long-term debt 1,034 681,966 683,000 --------------------------------------------------------------------------------------------------------------- May 31, 2001 $ 15,159 $ 2,572,629 $(3,333,094) $ 120,489 $ (624,817) Net loss (396,120) (396,120) Foreign currency adjustment (1,811) (1,811) ------------ Total comprehensive income (1,022,748) Compensation expense 1,035 198,496 199,531 Stock options exercised 550 124,080 124,630 --------------------------------------------------------------------------------------------------------------- August 31, 2001 $ 16,744 $ 2,895,205 $(3,729,214) $ 118,678 $ (698,587) ===============================================================================================================
7 DONINI, INC. and Subsidiaries Notes to Consolidated Financial Statements 1. Basis of Preparation The interim financial statements included herein have been prepared by the Company without audit. These statements reflect all adjustments, which are, in the opinion of management, necessary to present fairly the financial position as of August 31, 2001, and the results of operations and cash flows for the period then ended. All such adjustments are of a normal and recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes for the fiscal year ended May 31, 2001. 2. Common Stock and Stock Options (a) Summary of common stock outstanding: A summary of the common shares outstanding and transactions since June 1, 2001 is detailed as follows: Balance outstanding June 1, 2001 15,158,937 Issue of common shares for services rendered 1,035,000 Conversion of stock options issued to employees 550,000 Balance outstanding at August 31, 2001 16,743,937 Due to arrangements made with third parties to provide services to the Company that were executed in May 2001 an additional 1,035,000 shares of common stock was issued in August 2001. Also, certain options issued to certain key executives to acquire a maximum of 550,000 shares of common stock of the Company at $.001 were exercised in August 2001. The estimated fair value of the shares issued and the resultant conversion of discounted options amounted to $323,611 that has been recorded as compensation expense. (b) Stock options During the three months ended August 31, 2001 the following changes occurred in outstanding stock options. Options outstanding at May 31, 2001 9,235,000 Options granted -0- Options exercised 550,000 Options outstanding at August 31, 2001 8,685,000 8 3. Liquidity The accompanying financial statements have been prepared on the basis that the Company will continue as a going concern and that assets and liabilities have been recorded on the basis that the entity will be able to realize its assets and discharge its liabilities in the normal course of business. However, the accompanying financial statements report that the Company has incurred significant operating losses which were aggravated in 2001 due to costs associated with the recapitalization, product development and compensation, has a deficit in shareholders' equity and a working capital deficit at May 31, 2001. In addition, the Company may require additional financing to meet its current obligations. The above matters raise doubt as to the Company's ability to continue as a going concern. The Company's ability to continue as a going concern will depend on its return to profitable operations and the ability to obtain additional financing. Should the going concern assumption not be appropriate, significant adjustments may be necessary to the recorded amounts of assets and liabilities. In order to meet that challenge, the Company has adopted a plan to secure additional capital funding by engaging the services of an investment banker to raise an additional $2,000,000 of equity and/or debt financing through the issuance of common stock, convertible debentures or a combination thereof. In addition, the Company has secured further commitments from its existing and new customers for additional installations at their food services facilities to provide ready made frozen pizza and is seeking to finance this future growth through equipment leasing arrangements. Finally, the Company has adopted various streamlining and cost control measures to ensure that optimal profit margins are realized and that existing resources are maximized. 9 PART I Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Pizza Donini Inc. supports twenty-nine (29) franchised pizza outlets. At August 31, 2001 Pizza Donini Inc. also owned three (3) additional locations that are being held with the intention to sell as Donini franchises. All locations are in Greater Montreal. In the first quarter of fiscal 2002 the Company began offering for sale its fully topped ready-to-use self-rising crust, frozen pizza in twenty-seven (27) in-store restaurants of Zellers, Inc. During the second quarter of fiscal 2002, the Company extended the sale of its fully-topped, ready-to-use self-rising crust frozen pizza to an additional seven (7) in-store restaurants of Zellers in Winnipeg, Manitoba, the Molson Center in Montreal and four (4) other business-to-business relationships. Pizza Donini Inc. is further developing its B2B (business to business) distribution network of fully-topped, ready-to-use, self-rising crust, frozen pizza to foodservice customers and is in discussion with a number of potential customers such as department store cafeterias, other restaurants, hospitality and leisure venues, convenience stores, and contract caterers. In addition to generating revenues from its franchisees in the form of initial franchise fees and royalties, Pizza Donini Inc. revenues have also been generated by two other operating subsidiaries, Pizado Foods (2001) Inc. ("Pizado") and Pizza Donini.Com Inc. Pizado sells raw food products and other supplies to Donini franchisees and is offering selected products to other distributors and manufacturers. Pizado also intends to expand its distribution business. Pizza Donini.Com Inc. manages the call center that executes home delivery orders, from a single telephone number, to the closest franchisee. For the three months ended August 31, 2001 franchise operations accounted for approximately 48% of the Company's total revenues, while the sale of wholesale food products equaled approximately 50% and the remaining revenues accounted for 2%. This compares to 55%, 44% and 1% respectively for same fiscal 2000 period. The continued change in sales mix again resulted primarily from increased management focus on the wholesale food products markets and other business-to-business opportunities. During the first quarter of fiscal 2002 Company revenues were $504,074 as compared to $434,378 for the same period in 2001, an increase of $69,696 or 16.0%. Cost of goods sold for the three months ended August 31, 2001 was $170,655 or 67.3% as compared to $122,524 or 64.6% for the same period in fiscal 2001. The increase in sales is primarily a result of sales to Zellers, Inc. of approximately $66,000 during the first quarter of fiscal 2002. Cost of goods for the fully-topped, ready-to-use, self-rising crust, frozen pizza product that is sold to Zellers is also higher than other products traditionally sold by the Company which resulted in the increase in cost of goods for the first quarter of fiscal 2002 as compared to the same period in the prior year. 10 Net income/(losses) decreased $411,449 from $15,329 during the first three months fiscal 2001 to ($396,120) for the same period in 2002. The decrease in net income/(losses) are primarily due to increases in non-cash stock based compensation and general and administrative expenses of $323,611 and $84,345 respectively. The increase in general and administrative expenses were primarily made up of costs related to expansion of the business-to-business operations, officers and directors liability insurance and increases in travel costs related to the business combination of approximately $42,000, $11,000 and $19,000 respectively. Working capital deficit during this period increased from $1,070,896 at May 31, 2001 to $1,180,371 at August 31, 2001. Total assets increased from $1,001,343 as of May 31, 2001 to $1,082,782 as of August 31, 2001. Management believes that the results reflected above are due to increased management focus on the wholesale food products markets and additional costs associated with its combination with Donini, Inc. In addition, management believes that its investment into its centralized call center and other marketing efforts of Pizza Donini.Com Inc. and its development of a high quality product line will result in future expansion and increased profitability. Management also believes that operating profits have been lowered due to the investment into new products. The Company maintains that its liquidity will improve marginally with improved earnings, but will not be sufficient to allow it to expand its operations to any significant degree. The Company has adopted a plan to secure additional capital funding by engaging the services of an investment banker to raise an additional $2,000,000 of equity and/or debt financing through the issuance of common stock, convertible debentures or a combination thereof. In addition, the Company has secured further commitments from its existing and new customers for additional installations at their food service facilities to provide fully topped ready-to-use self-rising crust frozen pizza and is seeking to finance this future growth through equipment leasing arrangements. The Company has maintained its liquidity through the first quarter of fiscal 2002 through net borrowings in short and long-term debt of approximately $200,000. PART II OTHER INFORMATION Item 1 - Legal Proceedings We are presently a party in the following legal proceedings: 161324 Canada Inc. vs. Do-Rest Inc. and Pizza Donini Inc. This action was instituted in April 1998 in an attempt to void the sale and transfer of trademarks from Do-Rest Inc. (formerly Donini Restaurant Inc.) to Pizza Donini Inc. and to have Pizza Donini Inc. declared jointly and severally liable for a claim in excess of $400,000 against Do-Rest Inc. a former subsidiary of Pizza Donini Inc. 161324 Canada Inc. was a former franchisee of Do-Rest Inc., which is no longer an operating company. The parties have agreed that no action will be taken by 161324 Canada Inc. on this matter until a decision has been rendered on the damages claim by 161324 Canada Inc. 11 161324 Canada Inc. vs. Do-Rest Inc. This action was instituted by a franchisee, 161324 Canada Inc., against its franchisor, Do-Rest Inc. (formerly Donini Restaurant Inc.). The franchisee sought in excess of $400,000 in damages, however in May of 1998 the action was dismissed by the Superior Court of Quebec. An appeal has been taken and a hearing date is not expected before February 2003. Legal counsel for Do-Rest Inc. has expressed confidence that the appeal will be dismissed thus causing the matter referenced above against our subsidiary Pizza Donini Inc. for joint and several liability to be dismissed as well. National Bank of Greece (Canada) vs. Pizza Donini Inc. This is an action by a former banker against our subsidiary Pizza Donini Inc. for repayment of a loan originally due in March 2003. Pizza Donini Inc. is disputing certain fees charged by the bank, has counter sued and ceased making monthly payments on the loan. The amount of the loan, including interest is approximately $55,000. We believe this matter will be settled for an amount less than the sum sought. The amount of this claim has been reported as a liability in the financial statements of the Company. No director, officer, or affiliate of the Company, or any associate of any of them, is a party to, or has a material interest in, any proceeding adverse to us. Item 2 - Changes in Securities and Use of Proceeds The total number of shares of Common Stock issued and outstanding as of August 31, 2001 was 16,743,937. Item 3 - Defaults Upon Senior Securities Not applicable. Item 4 - Submission of Matters to a Vote of Security Holders Not applicable. Item 6 - Exhibits and Reports on Form 8-K During the quarter ended August 31, 2001 we filed a Report on Form 8-K on June 5, 2001. 12 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DONINI, INC. Date: November 5, 2001 By: /s/ Peter Deros -------------------------------- Peter Deros, President 13