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, 2002
( ) 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. )
10 Henry Street, Teterboro, NJ 07608
(Address of principal executive office) (Zip Code)
Registrants telephone number, including area code: (201) 462 9000
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 1st, 2002 was 4,646,004
Transitional Small Business Disclosure Format Yes No X
Initio, Inc.
Form 10-QSB
For the Quarter Ended January 31, 2002
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, 2002 and 2001 1.
b) Consolidated Balance Sheets as of January 31st, 2002 and
April 30th, 2001 2.
c) Consolidated Statements of Stockholders Equity for the
nine months ended January 31st, 2002. 3.
d) Consolidated Statements of Cash Flows for the nine
months ended January 31st, 2002 and 2001 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 8.
Signatures 9.
Initio, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
For the
(Unaudited)
9 Months Ended 3 Months Ended
Jan. 31, 2002 Jan. 31, 2001 Jan. 31, 2002 Jan. 31, 2001
Revenues:
Interest and dividends $78,748 $289,024 ($8,124) $91,189
Gain (loss) on the sale of (15,886) (162,218) 81,754 45,532
marketable securities
Rental income - 38,000 - -
Other 32,824 - 12,595 -
95,686 164,806 86,225 136,721
Expenses:
General and administrative 345,673 347,836 115,820 153,816
Interest 136,106 146,058 45,083 46,533
481,779 493,894 160,903 200,349
Loss before inc tax benefit (386,093) (329,088) (74,678) (63,628)
Income tax benefit:
Current - - - -
Deferred - 111,900 - 21,180
Net loss (386,093) (217,188) (74,678) (42,448)
Other Comprehensive Income (Loss):
Unrealized Gains (Losses) on
Marketable Securities:
Arising during the period (954,571) (415,027) (250,818) (101,899)
Reclassification of gains
(losses) realized in
Other Income 2,296 118,239 24,471 (10,670)
(952,275) (296,788) (226,347) (112,569)
Comprehensive Loss $ (1,338,368) (513,976) (301,025) (155,017)
Loss per Common Share:
Basic ($0.08) ($0.05) ($0.02) ($0.01)
Diluted ($0.08) ($0.05) ($0.02) ($0.01)
Weighted Average Shares:
Basic 4,646,004 4,645,660 4,646,004 4,646,004
Diluted 4,646,004 4,645,660 4,646,004 4,646,004
The accompanying notes are an integral part of these financial statements.
1.
Initio, Inc.
Consolidated Balance Sheets
As at
Jan. 31, 2002 April 30, 2001
(Unaudited) (Audited)
Assets
Cash 218,305 358,616
Marketable securities 985,769 2,326,145
Deferred tax asset 1,236,596 1,236,596
Vehicles and equipment, net 77,827 20,531
Building held for sale 1,493,120 1,493,120
Assets held for sale 1,000,000 0
Convertible debenture 0 1,000,000
Notes receivable 498,844 482,561
Other assets 26,365 42,744
Total assets 5,536,826 6,960,313
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued expenses 134,685 171,737
Mortgage payable 730,091 778,158
Subordinated convertible debenture 1,500,000 1,500,000
Total liabilities 2,364,776 2,449,895
Commitments
Stockholders' Equity:
Common Stock, $ .01 par value, Authorized
10,000,000 shares, 5,053,575 issued and
4,646,004 outstanding shares 50,536 50,536
Additional paid in capital 8,653,660 8,653,660
Accumulated deficit (3,503,667) (3,117,574)
Accumulated other comprehensive loss (1,450,742) (498,467)
3,749,787 5,088,155
Less: Treasury stock, 407,571 common
shares (577,737) (577,737)
Total stockholders' equity 3,172,050 4,510,418
Total liabilities and stockholders' equity 5,536,826 6,960,313
The accompanying notes are an integral part of these financial statements.
2.
Initio, Inc.
Consolidated Statements of Stockholders' Equity
For the nine months ended January 31, 2002
(Unaudited)
Accumulated
Additional Other
Issued Common Paid in Accumlated Treasury Comprehensive
Shares Stock Capital Deficit Stock Income Total
Balance 5,053,575 $50,536 $8,653,660($3,117,574) ($577,737) (498,467)$4,510,418
May 1
2001
Other comprehensive loss (925,275) (925,275)
Net loss (386,0935) (386,093)
Balance 5,053,575 $50,536 $8,653,660($3,503,667) ($577,737)(1,450,742)3,172,050
Jan 31
2002
The accompanying notes are an integral part of these financial statements.
3.
Initio, Inc.
Consolidated Statements of Cash Flows
For the nine months ended
(Unaudited)
Jan. 31, 2002 Jan. 31, 2001
Cash Flows from Operating Activities
Net loss (386,093) (217,188)
Loss on sale of marketable securities 15,886 162,218
Depreciation 13,794 5,166
Deferred tax benefit - (111,900)
Net (increase) decrease in other assets 16,379 (51,213)
Net decrease in other liabilities (37,052) (119,311)
Net cash (used in) operating activities (377,086) (332,228)
Cash flows from Investing Activities
Purchases of property and equipment (71,090) (3,114)
Net proceeds from sales/(purchases) of
marketable securities 372,215 433,993
Increase in notes receivable (40,262) (50,750)
Proceeds from collection of notes receivable 23,979 17,806
Net cash provided by investing activities 284,842 397,935
Cash Flows from Financing Activities
Mortgage repayment (48,067) (37,814)
Net proceeds from issuance of
common stock - 1,000
Net cash (used in) financing activities (48,067) (36,814)
Net increase (decrease) in Cash (140,311) 28,893
Cash at beginning of period 358,616 550,025
Cash at end of period 218,305 578,918
Supplemental disclosures:
Cash paid during the period for:
Interest 132,691 142,643
Income taxes - 40,500
Non-Cash Investing and Financing Activities:
Decrease in fair value of available-for-sale 954,571 415,027
securities
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. 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 adjustments (consisting only of normal recurring items)
necessary to present fairly the financial position as of January 31st,
2002; results of operations for the nine months ended January 31st,
2002, and 2001; cash flows for the nine months ended January 31st,
2002 and 2001; 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, 2001. The Balance sheet at
April 30th, 2001 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 does
not include common shares associated with employee stock options or
Companys subordinated convertible debenture because of their anti-
dilutive effect.
5.
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 judgments 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. 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 $215,000 and $87,000 for the nine
and three month periods ending January 31, 2002, respectively as
compared to the comparable periods in 2001. The decrease was
primarily attributable to a decrease in interest income. The
Companys general, administrative and interest expenses decreased by
approximately $12,000 for the nine months ended January 31, 2002 and
decreased by approximately $39,000 for the three months ended January
31, 2002 as compared to the comparable periods in 2001.
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 discharged $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. In April 2001 this debenture, in the amount of
$3,000,000 was in default on the payment of interest, which default
has not been cured as of the present time. The Company has recorded
as of April 30, 2001 a $2,000,000 reserve against the collectability
of this debenture, which is in default and may not be collectible.
6.
Liquidity and Capital Resources: (Continued)
In September 2001 the Company gained possession of the customer list
and other intangible assets of The Deerskin and Joan Cook Catalogs
pursuant to its secured interest in connection with the defaulted
loan. The Company is presently pursuing various alternatives to sell
and or market the list in a commercially reasonable manner in order to
recover as much as possible of the $3,000,000 principal amount, which
it is owed on the secured debenture presently in default.
As of January 31st, 2002 the Company had approximately $1,204,000 in
cash and marketable securities.
As of January 31st, 2002 the Company's liabilities, excluding the
subordinated debenture and the mortgage payable, was approximately
$134,685.
7.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
None
(B ) Reports on Form 8-K
Initio, Inc. filed no reports on Form 8-K during the quarter ended
January 31st, 2002.
Items 1,2,3,4 and 5 are not applicable and have been omitted.
8.
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 8th, 2002 By: /s/ Martin Fox
Martin Fox
President and Office of the
Chief Executive, Secretary, Treasurer
and Chief Financial
Officer
By: /s/ Daniel DeStefano
Daniel DeStefano
Chairman of the Board and
Office of the Chief Executive
9.