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 January 31st, 2001
( ) 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
March 11th, 2001 was 4,646,004
Transitional Small Business Disclosure Format Yes No X
Initio, Inc.
Form 10-QSB
For the Quarter Ended January 31, 2001
Contents
Part I. Financial Information Page
Item 1. Financial Statements
a) Consolidated Statements of Operations and Comprehensive Income(Loss)
for the Three and nine Months Ended January 31st, 2001 and 2000 1.
b) Consolidated Balance Sheets as of January 31st , 2001 and
April 30th, 2000 3.
c) Consolidated Statement of Stockholder Equity for the nine months
ended January 31st, 2001 4.
d) Consolidated Statements of Cash Flows for the nine
Months Ended January 31st, 2001 and 2000 5.
e) Notes to Financial Statements 7.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8K
a) Exhibit 27 11.
Signatures 12.
Initio, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
For the
(Unaudited)
9 Months Ended 3 Months Ended
Jan31,2001 Jan31,2000 Jan31,2001 Jan31,2000
Revenues:
Interest and dividends $289,024 $240,199 $91,189 $38,516
Gain (loss) on the sale of (162,218) 161,632 45,532 105,900
marketable securitues
Rental income 38,000 252,000 - 84,000
Other - 48,914 - 14,580
164,806 702,745 136,721 242,996
Expenses:
General and administrative 347,836 422,449 153,816 141,481
Interest 146,058 184,177 46,533 51,114
493,894 606,626 200,349 192,595
Income (loss) from continuing operations
before income (taxes) benefit (329,088) 96,119 (63,628) 50,401
Income tax (expense) benefit:
Current - (32,700) - (17,200)
Deferred 111,900 920,000 21,180 -
Income (loss) from continuing oper. (217,188) 983,419 (42,448) 33,201
Gain on sale of discontinued operations, net of
income taxes of $ 884,000 - 1,488,727 - (15,259)
Net income (loss) (217,188) 2,472,146 (42,448) 17,942
Other Comprehensive Income (Loss), before tax:
Unrealized Gains ( Losses ) on
Marketable Securities:
Arising during the period (415,027) 592,392 (101,899) 847,859
Reclassification of (Gains)
Losses realized inOther Income 118,239 (81,404) (10,670) (17,690)
Other comprehensive income (loss), (296,788) 510,988 (112,569) 830,169
before tax:
Income tax expense related to other
comprehensive income - (173,800) - (282,300)
Other comprehensive income (loss), (296,788) 337,188 (112,569) 547,869
after tax
Comprehensive income ( Loss ) (513,976) 2,809,334 (155,017) 565,811
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
(Unaudited)
9 Months Ended 3 Months Ended
Jan. 31, 200Jan. 31, 200Jan. 31, 200Jan. 31, 2000
Income (Loss) per Common Share:
Basic:
Continuing operations ($0.05) $0.21 ($0.01) $0.01
Income from discontinued
operations - 0.32 - -
Net income (loss) ($0.05) $0.53 ($0.01) $0.01
Diluted:
Continuing operations ($0.05) $0.21 ($0.01) $0.01
Income from discontinued
operations - 0.32 - -
Net income (loss) ($0.05) $0.53 ($0.01) $0.01
Weighted Average Shares
Basic 4,645,660 4,642,047 4,646,004 4,638,748
Diluted 4,645,660 4,642,247 4,646,004 4,638,948
The accompanying notes are an integral part of these financial statements.
2.
Initio, Inc.
Consolidated Balance Sheets
As at
Jan. 31, 2001 April 30, 2000
(Unaudited) (Audited)
Assets
Cash $578,918 550,025
Marketable securities 2,045,283 2,938,282
Deferred tax asset 1,373,662 1,261,762
Building and improvements, net 1,493,120
Vehicles and equipment, net 22,103 24,155
Building held for sale 1,493,120
- -
Convertible debenture 3,000,000 3,000,000
Notes receivable 479,785 426,841
Other assets 75,684 44,471
Total assets $9,068,555 9,738,656
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued expenses 57,975 109,286
Income taxes payable 5,000 45,000
Mortgage payable 787,763 825,577
Other liabilities 28,000
Subordinated convertible debenture 1,500,000 1,500,000
2,350,738 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, 5,052,575 $50,536 50,526
issued and 4,645,004 outstanding shares
respectively
Additional paid in capital $8,653,660 8,652,670
Accumulated deficit (1,229,136) (1,011,948)
Accumulated other comprehensive income (loss) (179,506) 117,282
7,295,554 7,808,530
Less: Treasury stock, 407,571 common
shares (577,737) (577,737)
Total stockholders' equity 6,717,817 7,230,793
Total liabilities and stockholders' equity $9,068,555 $9,738,656
The accompanying notes are an integral part of these financial statements.
3.
Initio, Inc.
Consolidated Statements of Stockholders' Equity
For the nine months ended January 31, 2001
(Unaudited)
Accumulated
Additional Other
Issued Common Paid in Accumlated 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
Apr 30
2000
Exercise 1,000 10 990
of employee
stock options
Other comprehensive loss (296,788) (296,788)
Net loss (217,188) (217,188)
Balance 5,053,575 $50,536 $8,653,660($1,229,136) ($577,737)
($179,506)$6,717,817
Jan 31
2001
The accompanying notes are an integral part of these financial statements.
4.
Initio, Inc.
Consolidated Statements of Cash Flows
For the nine months ended
(Unaudited)
Jan. 31, 2001 Jan 31, 2000
Cash Flows from Operating Activities
Net income (loss) $ (217,188) $2,472,146
Gain on sale of discontinued operations - (1,488,727)
(Gain) loss on sale of marketable securities 162,218 (161,632)
Depreciation 5,166 54,373
Deferred tax benefit (111,900) (920,000)
Net increase in net assets of disc. operations - (297,837)
Net increase in other assets (51,213) (81,124)
Net increase (decrease) in other liabilities (119,311) 73,772
Net cash (used in) operating activities (332,228) (349,029)
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)
Proceeds from collection of convertible debenenture- 400,000
Net proceeds from sales/(purchases) of
marketable securities 433,993 (614,523)
Increase in notes receivable (50,750) -
Proceeds from collection of notes receivable 17,806 6,234
Net cash provided by investing activities 397,935 559,192
Cash Flows from Financing Activities
Mortgage repayment (37,814) (36,328)
Treasury stock repurchased and retired - (5,176)
Net proceeds from issuance of
common stock 1,000 -
Net cash (used in) financing activities (36,814) (41,504)
Net increase in Cash 28,893 168,659
Cash at beginning of period 550,025 1,182,993
Cash at end of period $578,918 $1,351,652
The accompanying notes are an integral part of these financial statements.
5.
Initio, Inc.
Consolidated Statements of Cash Flows (continued):
For the nine months ended
(Unaudited)
Jan. 31, 2001 Jan 31, 2000
Supplemental disclosures:
Cash paid during the period for:
Interest $ 142,643 $ 157
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 Debenenture- $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 $ 415,027 $592,392
securities
The accompanying notes are an integral part of these financial statements.
6.
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,
including estimates of future revenues and expenses and assumptions
that affect the reported amounts of assets, liabilities, revenue and
expenses and consequently stockholders equity.
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 January 31st,
2001; results of operations for the nine and three months ended
January 31st, 2001, and 2000; cash flows for the nine months ended
January 31st, 2001 and 2000; 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
7.
for all quarters of fiscal years beginning after June 15,1999. In July
1999, the FASB issued 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 amends 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 2000, 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.
8.
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 $214,000 and $46,000 for the nine
and three month periods ending January 31st, 2001, respectively as
compared to the comparable periods in 2000. 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 $113,000 and $8,000, for the nine and three month
periods ending January 31st, 2001, respectively as compared to the
comparable periods in 2000.
In the period ended January 31st, 2000, the Company recorded a gain on
the sale of discontinued operations of $1,488,727 (net of income
taxes). No such gain was recorded in the current period. As a
consequence of the foregoing the company reported a net loss in the
period ended January 31st, 2001 of $217,188 versus net income of
$2,472,146 in the period ended January31st, 2000.
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. This agreement was terminated in March of 2001
by mutual agreement and the company received $350,000 to reimburse it
for expenses incurred.
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 January 31st, 2001 the Company had $ 2,624,201 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 January 31st, 2001 the Company's liabilities,
excluding the subordinated debenture and the mortgage payable, was
approximately $ 62,975.
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
January 31st, 2001.
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 Nine Months 12 Months Nine Months
Period End January 31, April 30, January 31,
2001 2000 2000
Cash $578,918 $550,025 $1,351,652
Securities 2,045,283 2,938,282 2,495,204
Current assets N/A N/A N/A
Property and Equipment 59,052 2,131,182 2,124,938
Accumulated Depreciation 36,949 613,907 634,932
Total Assets 9,068,555 9,738,656 9,608,321
Current Liabilities N/A N/A N/A
Bonds 1,500,000 1,500,000 1,500,000
Preferred Stock 0 0 0
Common Stock 50,536 50,526 50,492
Other Stockholders' Equity 6,667,281 7,180,267 7,105,834
Total Liabilities & Stockholders' Equity 9,068,555 9,738,656 9,608,321
Income 164,806 1,061,115 702,745
Other Expenses 347,836 676,812 422,449
Interest Expense 146,058 234,543 184,177
Net Income (loss) (217,188) 2,814,360 2,472,146
Basic Income (loss) per share .05 .61 .53
Diluted Income (loss) per share .04 .57 .53
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: March 11th, 2001 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.