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 October 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)
Registrants 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 registrants common stock as
of
December 1st, 2000 was 4,646,004
Transitional Small Business Disclosure Format Yes No X
Initio, Inc.
Form 10-QSB
For the Quarter Ended October 31, 2000
Contents
Part I. Financial Information
Page
Item 1. Financial Statements
a) Consolidated Statements of Operations and Comprehensive Income
(Loss) for the Three and six
Months Ended October 31st, 2000 and 1999
1.
b) Consolidated Balance Sheets as of October 31st, 2000 and
April 30th, 2000
2.
c) Consolidated Statement of Stockholder Equity
for the six months ended October 31, 2000
3.
d) Consolidated Statements of Cash Flows for the six
Months Ended October 31st, 2000 and 1999
4.
e) Notes to Financial Statements
5.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
6.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8K
a) Exhibit 27
8.
Signatures
10.
Initio, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
For the
(Unaudited)
6 Months Ended 3 Months Ended
Oct. 31, 2000 Oct. 31, 1999 Oct. 31, 2000 Oct. 31, 1999
Revenues:
Interest and 197,835 201,683 109,572 101,440
dividends
Gain (loss) on (207,750) 55,732 (265,944) 11,939
sale of marketable
securities
Rental income 38,000 168,000 - 84,000
Other - 34,334 - 15,979
28,085 459,749 (156,372) 213,358
Expenses:
General and admin 194,020 280,968 77,857 134,734
Interest 99,525 133,063 48,908 51,375
293,545 414,031 126,765 186,109
Income (loss) from continuing operations
before income ( (265,460) 45,718 (283,137) 27,249
Income tax (expense) benefit:
Current - - 620 (15,500)
Deferred 90,720 904,500 96,300 -
Income (loss) fro (174,740) 950,218 (186,217) 11,749
Gain on sale of discontinued operations, net of
income taxes of $884,000 0 1,503,986 - -
Net income (loss) (174,740) 2,454,204 (186,217) 11,749
Other Comprehensive Income (Loss):
Unrealized Gains ( Losses ) on
Marketable Securities:
Arising during (313,128) (255,467) (206,476) (201,547)
Reclassification of (Gains) Losses Realized in
Other Income 128,909 (63,714) 140,299 (15,198)
(184,219) (319,181) (66,177) (216,745)
Comprehensive inc (358,959) 2,135,023 (252,394) (204,996)
Income (Loss) per Common Share:
Basic:
Continuing operations (0.04) 0.20 (0.04) 0.00
Income (loss) from discontinued
operatons 0.00 0.32 - -
Net income (loss) (0.04) 0.52 (0.04) 0.00
Diluted:
Continuing operations (0.03) 0.20 (0.04) 0.00
Income (loss) from discontinued
operations 0.00 0.30 - -
Net income (loss) (0.03) 0.50 (0.04) 0.00
Weighted Average Shares
Basic 4,645,488 4,643,697 4,645,971 4,640,541
Diluted 5,193,099 4,968,572 5,228,089 4,965,416
The accompanying notes are an integral part of these financial statements.
1.
Initio, Inc.
Consolidated Balance Sheets
As at
Oct. 31, 2000 April 30, 2000
(Unaudited) (Audited)
Assets
Cash 566,636 550,025
Marketable securities 2,330,824 2,938,282
Deferred tax asset 1,352,482 1,261,762
Building and improvements, net 0 1,493,120
Vehicles and equipment, net 23,846 24,155
Building held for sale 1,493,120 0
Convertible debenture 3,000,000 3,000,000
Notes receivable 440,309 426,841
Other assets 82,801 44,471
Total assets 9,290,018 9,738,656
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued expenses 111,277 109,286
Income taxes payable 4,500 45,000
Mortgage payable 801,407 825,577
Other liabilities 0 28,000
Subordinated convertible debenture 1,500,000 1,500,000
2,417,184 2,507,863
Commitments
Stockholders' Equity
Common Stock, $ .01 par value, Authorized
10,000,000 shares, 5,053,575 issued and
4,646,004 outstanding shares, 5,052,57 50,536 50,526
issued and 4,645,004 outstanding shares
respectively
Additional paid in capital 8,653,660 8,652,670
Accumulated deficit (1,186,688) (1,011,948)
Accumulated other comprehensive income (66,937) 117,282
7,450,571 7,808,530
Less: Treasury stock, 407,571 common
shares (577,737) (577,737)
Total stockholders' equity 6,872,834 7,230,793
Total liabilities and stockholders' 9,290,018 9,738,656
The accompanying notes are an integral part of these financial statements.
2.
Initio, Inc.
Consolidated Statements of Stockholders' Equity
For the six months ended October 31, 2000
(Unaudited)
Accumulated
Additional Other
Issued Common Paid In Accumulated Treasury Comprehensive
Shares Stock Capital Deficit Stock Income Total
Balance 5,052,575 50,526 8,652,670 (1,011,948) (577,737) 117,282 7,230,793
April 30,2000
Exercise
of 1,000 10 990 1,000
employee
stock options
Other (184,219) (184,219)
comprehensive
loss
Net loss (174,740) (174,740)
Balance 5,053,575 50,536 8,653,660 (1,186,688) (577,737) (66,937) 6,872,834
October 31, 2000
The accompanying notes are an integral part of these financial statements.
3.
Initio, Inc.
Consolidated Statements of Cash Flows
For the six months ended
(Unaudited)
Oct. 31, 2000 Oct 31, 1999
Cash Flows from Operating Activities
Net income (loss) (174,740) 2,454,204
Gain on sale of discontinued operations - (1,503,986)
(Gain) loss on sale of marketable securities 207,750 (55,732)
Depreciation 3,423 39,704
Deferred tax benefit (90,720) (904,500)
Net increase in net assets of discontinued operat - (282,578)
Net increase in other assets (55,872) (21,679)
Net increase (decrease) in other liabilities (66,509) 29,066
Net cash (used in) operating activities (176,668) (245,501)
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 (3,114) (37,927)
Net proceeds from sales/(purchases) of
marketable securities 215,489 (228,562)
Proceeds from collection of notes receivable 4,074 3,095
Net cash provided by investing activities 216,449 542,014
Cash Flows from Financing Activities
Mortgage repayment (24,170) (25,162)
Net proceeds from issuance of
common stock 1,000 -
Net cash (used in) financing activities (23,170) (25,162)
Net increase in Cash 16,611 271,351
Cash at beginning of period 550,025 1,182,993
Cash at end of period 566,636 1,454,344
Supplemental disclosures:
Cash paid during the period for:
Interest 97,249 107,450
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
Decrease in fair value of available-for-sale secu 313,128 255,467
The accompanying notes are an integral part of these financial statements.
4.
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. Including 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 adjustments (consisting only of normal recurring items)
necessary to present fairly the financial position as of October 31st,
2000; results of operations for the six and three months ended October
31st, 2000, and 1999; cash flows for the six months ended October
31st, 2000 and 1999; for further information, refer to the Companys
financial statements and notes thereto included in the Companys 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 (Loss) per Share:
Basic Income (Loss) per Common Share has been computed based upon the
weighted average number of actually outstanding shares of the
Companys common stock. Diluted Income (Loss) per Common Share
includes common shares associated with certain outstanding employee
stock options and a portion of the Companys subordinated convertible
debenture.
Recently Issued Accounting Standards:
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which establishes accounting and reporting standards of
derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. This
statement is effective
5.
for all quarters of fiscal years beginning after June 15,1999. In July
1999, the FASB issues SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB No. 133, "which amends SFAS No. 133 effective
for all fiscal quarters of all fiscal years beginning after June 15,
2000. In June 2000, the FASB issued SFAS No. 138 "Accounting for
Certain Hedging Activities, an amendment of FASB Statement No. 133",
effective for all interim and annual periods beginning after June 15,
2000. As indicated, SFAS No. 138 amend accounting and reporting
standards for certain derivative instruments and certain hedging
activities. Initio does not expect the adoption of these standards to
have a material effect on the results of consolidated operations,
financial position or cash flows.
Recent Events
In November the Company learned that a default judgement had been
entered against Deerskin Trading Post, Inc. The company has retained
a Virginia counsel and is seeking to have that judgement vacated.
There can be no assurance that such judgement will in fact be vacated
and if it is not, the company may be liable for approximately
$200,000.
Item 2. Managements 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 Companys results of operations and financial condition. The
discussion should be read in conjunction with the Companys Financial
Statements and Notes thereto.
Managements discussion and analysis contains forward-looking
statements about the Companys 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
$1,800,000. Since that time the Company has been in the process of
identifying new business opportunities.
6.
The Companys revenues, excluding gains on the sale of marketable
securities which are transactional in nature and vary from period to
period, decreased by approximately $168,000 and $92,000 for the six
and three month periods ending October 31st, 2000, respectively as
compared to the comparable periods in 1999. The decrease was
primarily attributable to the termination of the lease for the
Companys Nevada facility and the termination of management fee income
from the buyer of the Companys catalog business. The Companys
general, administrative and interest expenses decreased by
approximately $ 120,000 and $ 59,000, for the six and three month
periods ending October 31st, 2000, respectively as compared to the
comparable periods in 1999.
In the period ended October 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 loss in the
period ended October 31st, 2000 of $174,740 versus net income
$2,454,204 in the period ended October 31st, 1999.
On July 20th, 2000 the Company entered into a merger agreement with
IncuLab, Inc. ( a Delaware Corporation). 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. The merger agreement further provides for Value Support
Rights for the shareholders of Initio (prior to the merger) at $5.00
per share. The closing of this transaction is subject to certain
terms and conditions.
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 October 31st , 2000 the Company had $ 2,897,460 in cash and
marketable securities.
The sale in May, 1999 of the Companys catalog operations also reduced
its long-term liability on the subordinated debenture from $ 3,500,000
to $ 1,500,000. As of October 31st, 2000 the Company's liabilities,
excluding the subordinated debenture and the mortgage payable, was
approximately $ 116,000.
7.
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
October 31st, 2000.
Items 1,2,3,4 and 5 are not applicable and have been omitted.
8.
Signature
Exhibit 27
This schedule contains summary information extracted from
the Companys accompanying audited financial statements and
is qualified in its entirety by reference to such financial
statements.
Period Six Months 12 Six
Months Months
Period End October 31, April October
2000 30, 2000 31, 1999
Cash $ 566,636 $550,025 $1,454,344
Securities 2,330,824 2,938,282 1,173,174
Current assets N/a N/a n/a
Property and Equipment 59,052 2,131,182 2,124,938
Accumulated Depreciation 35,206 613,907 620,263
Total Assets 9,290,018 9,738,656 8,905,646
Current Liabilities N/a N/a N/a
Bonds 1,500,000 1,500,000 1,500,000
Preferred 0 0 0
Common 50,536 50,526 50,542
Other Stockholders Equity 6,822,298 7,180,267 6,436,649
Total Liabilities & 9,290,018 9,738,656 8,905,646
Stockholders Equity
Income 28,085 1,061,115 459,749
Other Expenses 194,020 676,812 280,968
Interest Expense 99,525 234,543 133,063
Net Income (loss) (174,740) 2,814,360 2,454,204
Basic Income (loss) per (.04) .61 .52
share
Diluted Income (loss) per (.03) .57 .50
share
9.
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: December 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
10.
:COMO OFF