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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ________ to ________
Commission File No. 000-29477
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D'ANGELO BRANDS, INC.
(exact name of registrant as specified in its charter)
Nevada 87-063686
(state of organization) (I.R.S. Employer
Identification No.)
14 Brewster Road, Brampton, Ontario, Canada, L6T 5B7
(address of principal executive offices)
(905) 794-0335
Registrant's telephone number, including area code
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
================================================================================
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
20,582,863 Class A Common shares and 30,854,396 Class B Common shares as at
December 13, 2002.
NOTE REGARDING PROJECTIONS AND FORWARD LOOKING STATEMENTS
This quarterly report on Form 10-QSB contains statements that are forward-
looking statements within the meaning of the federal securities laws. These
include statements about our expectations, beliefs, intentions or strategies for
the future, which we indicate by words or phrases such as "anticipate,"
"expect," intend," "plan," "will," "believe" and similar language. These
statements involve known and unknown risks, including whether or not we will be
able to obtain the funding we need to continue our operations, whether or not we
are able to attract and retain qualified personnel to help us in developing our
business, whether or not we will be able to compete with larger, well-funded
competitors in the industry, whether or not consumer tastes for juice drinks
will change and other business conditions, and are subject to uncertainties and
assumptions set forth elsewhere in this report. Our actual results may differ
materially from results anticipated in these forward-looking statements. We
base our forward looking statements on information currently available to us,
and we assume no obligation to update these statements.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Balance Sheets as at October 31, 2002
(unaudited) and April 30, 2002
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited) for the three months and six months then ended
Consolidated Statements of Stockholder's Equity (Deficiency)
(Unaudited) for the three months then ended
Consolidated Statements of Cash Flows (Unaudited) for the
three months and six months then ended.
Notes to the Consolidated Financial Statements (Unaudited)
CONTENTS Page
Consolidated Financial Statements:
Balance Sheets (Unaudited) F-1
Statements of Operations and Comprehensive Loss (Unaudited) F-2
Statements of Stockholders' Equity (Deficiency) (Unaudited) F-3
Statements of Cash Flows (Unaudited) F-4
Notes to Financial Statements (Unaudited) F-6
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F-1
D'Angelo Brands, Inc. And Subsidiaries
Consolidated Balance Sheets
As at October 31, 2002 (unaudited) and April 30, 2002
<table>
<caption>
<s> <c> <c>
October 31 April 30
2002 2002
------------ ------------
ASSETS (unaudited)
Current
Accounts receivable $ 71,080 $ 17,905
Inventories 143,315 98,205
Prepaid expenses and deposits 65,402 19,146
------------ ------------
279,797 135,256
------------ ------------
Capital Assets, Net 5,823,765 2,700,866
$ 6,103,562 $ 2,836,122
============ ============
LIABILITIES
Current
Accounts payable and accrued liabilities $ 3,544,023 $ 2,268,356
Mortgages and other debt 4,077,007 3,054,439
------------ ------------
7,621,030 5,322,795
Long Term Debt 3,192,644 -
Commitment & Contingencies (Note11) - -
------------ ------------
$ 10,813,674 $ 5,322,795
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, par value $0.001;
Class A - 200,000,000 shares authorized;
20,582,863 and 15,487,259 shares issued and outstanding $ 20,583 $ 15,487
Class B - 50,000,000 shares authorized;
30,854,396 and 35,950,000 shares issued and outstanding 30,854 35,950
Additional paid-in capital 3,573,577 3,573,577
Stock Subscription Receivable - (96,774)
Advances to Director (422,064) (291,080)
Accumulated Other Comprehensive Gain (Loss) 33,286 34,172
Accumulated Deficit (7,946,348) (5,758,005)
------------ ------------
(4,710,112) (2,486,673)
------------ ------------
$ 6,103,562 $ 2,836,122
============ ============
</table>
F-2
D'Angelo Brands, Inc. And Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss
for the three months and six months ended October 31, 2002 and 2001
(Unaudited)
<table>
<caption>
<s> <c> <c> <c> <c>
Three months ended October 31 Six months ended October 31
----------------------------- ---------------------------
2002 2001 2002 2001
--------- --------- ---------- ----------
(restated - (restated -
note 2) note 2)
Sales $ 894,983 $ 43,247 $ 1,638,961 $ 342,226
Cost of Sales 961,698 63,795 1,822,125 315,334
--------- --------- ---------- ----------
Gross Profit (66,715) (20,548) (183,164) 26,892
Commission Income - 28,804 - 28,804
--------- --------- ---------- ----------
(66,715) 8,256 55,696
Selling, Marketing, Distribution and Warehousing Expenses 192,291 69,376 346,040 172,214
General and Administrative Expenses 316,276 83,020 587,234 248,178
--------- --------- ---------- ----------
508,567 152,396 933,274 420,392
--------- --------- ---------- ----------
Loss before other expenses (575,282) (144,140) (1,116,438) (364,696)
--------- --------- ---------- ----------
Other Expenses
Financing Expenses 513,879 118,414 801,879 174,947
Interest 162,808 55,619 270,026 55,619
--------- --------- ---------- ----------
676,687 174,033 1,071,905 230,566
--------- --------- ---------- ----------
Loss before income taxes (1,251,969) (318,173) (2,188,343) (595,262)
Provision for income taxes - - - -
--------- --------- ---------- ----------
Net Loss (1,251,969) (318,173) (2,188,343) (595,262)
Other comprehensive gain (loss), net of taxes -
foreign currency translation (24,247) 62,632 (886) 41,657
---------- --------- ---------- ----------
Comprehensive Loss ($1,276,216) ($255,541) ($2,189,229) ($553,605)
========== ========= ========== ==========
Loss per common share, basic and diluted ($0.06) ($0.01) ($0.12) ($0.02)
========== ========= ========== ==========
Weighted average number of common shares
outstanding, basic and diluted 20,582,863 35,277,358 18,090,448 35,568,846
========== ========= ========== ==========
</table>
F-3
D'ANGELO BRANDS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(Unaudited)
<table>
<caption>
<s> <c> <c> <c> <c> <c>
Common Stock Additional
Paid-In
Class A Amount Class B Amount Capital
------------ -------- ---------- ------- ----------
Balance at July 31, 2001 35,892,724 $35,893 $0 $0 $1,107,352
Shares issued for cash before the 107,276 $107 $28,612
acquisition of D'Angelo Acquisition Inc.
Issuance of class B common stock (36,000,000) ($36,000) 36,000,000 $36,000
Issuance of common stock on ------------ -------- ---------- ------- ----------
acquisition of D'Angelo Acquisition Inc. 7,532,259 $7,532 ($7,532)
Advances to Director
Foreign Currency Translation Adj
Net Loss
Balance at October 31, 2001 7,532,259 $7,532 36,000,000 $36,000 $1,128,432
Shares issued for cash 1,725,000 $1,725 $228,073
Stock subscription receivable
Advances to Director
Foreign Currency Translation Adj
Net Loss ------------ -------- ---------- ------- ----------
Balance at January 31, 2002 9,257,259 $9,257 36,000,000 $36,000 $1,356,505
Conversion of Class-B to Class-A shares 50,000 $50 (50,000) ($50)
Shares issued for cash 500,000 $500 $47,887
Expense for shares sold below market value $698,065
Shares issued for services rendered 5,680,000 $5,680 $1,471,120
Advances to Director
Foreign Currency Translation Adj
Net Loss ------------ -------- ---------- ------- ----------
Balance at April 30, 2002 15,487,259 $15,487 35,950,000 $35,950 $3,573,577
Conversion of Class-B to Class-A shares 5,095,604 $5,096 (5,095,604) ($5,096)
Stock subscription receivable
Advances to Director
Foreign Currency Translation Adj
Net Loss ------------ -------- ---------- ------- ----------
Balance at July 31, 2002 20,582,863 $20,583 30,854,396 $30,854 $3,573,577
Stock subscription receivable
Advances to Director
Foreign Currency Translation Adj
Net Loss ------------ -------- ---------- ------- ----------
Balance at October 31, 2002 20,582,863 $20,583 30,854,396 $30,854 $3,573,577
<caption>
<s> <c> <c> <c> <c> <c>
Stock Advances to Accumulated Other Accumulated Stockholders
Subscription Director Comprehensive Deficit Equity
Receivable Gain /(Deficiency)
----------- --------- --------- ---------- ----------
Balance at July 31, 2001 $0 ($233,867) $13,487 ($1,261,948) ($339,083)
Shares issued for cash before the $28,719
acquisition of D'Angelo Acquisition Inc.
Issuance of class B common stock $0
Issuance of common stock on
acquisition of D'Angelo Acquisition Inc. $0
Advances to Director $105,264 $105,264
Foreign Currency Translation Adj $62,632 $62,632
Net Loss ($318,173) ($318,173)
----------- --------- --------- ---------- ----------
Balance at October 31, 2001 $0 ($128,603) $76,119 ($1,580,121) ($460,641)
Shares issued for cash $229,798
Stock subscription receivable ($96,774) ($96,774)
Advances to Director ($102,075) ($102,075)
Foreign Currency Translation Adj ($1,274) ($1,274)
Net Loss ($281,970) ($281,970)
----------- --------- --------- ---------- ----------
Balance at January 31, 2002 ($96,774) ($230,678) $74,845 ($1,862,091) ($712,936)
Conversion of Class-B to Class-A shares $0
Shares issued for cash $48,387
Expense for shares sold below market value $698,065
Shares issued for services rendered $1,476,800
Advances to Director ($60,402) ($60,402)
Foreign Currency Translation Adj ($40,673) ($40,673)
Net Loss ($3,895,914) ($3,895,914)
----------- --------- --------- ---------- ----------
Balance at April 30, 2002 ($96,774) ($291,080) $34,172 ($5,758,005) ($2,486,673)
Conversion of Class-B to Class-A shares $0
Stock subscription receivable $63,472 $63,472
Advances to Director ($42,403) ($42,403)
Foreign Currency Translation Adj $23,361 $23,361
Net Loss ($936,374) ($936,374)
----------- --------- --------- ---------- ----------
Balance at July 31, 2002 ($33,302) ($333,483) $57,533 ($6,694,379) ($3,378,617)
Stock subscription receivable $33,302 $33,302
Advances to Director ($88,581) ($88,581)
Foreign Currency Translation Adj ($24,247) ($24,247)
Net Loss ($1,251,969) ($1,251,969)
----------- --------- --------- ---------- ----------
Balance at October 31, 2002 $0 ($422,064) $33,286 ($7,946,348) ($4,710,112)
</table>
F-4
D'Angelo Brands, Inc. And Subsidiaries
Consolidated Statements of Cash Flows
for the three months and six months ended October 31, 2002 and 2001
(Unaudited)
<table>
<caption>
<s> <c> <c> <c> <c>
Three months ended October 31 Six months ended October 31
----------------------------- ---------------------------
2002 2001 2002 2001
--------- --------- ---------- ----------
(restated - (restated -
note 2) note 2)
Cash Flows from Operating Activities
Net loss ($1,251,969) ($318,173) (2,188,343) ($595,262)
Adjustments to reconcile net loss to
net cash used for operating activities:
Write-off of deferred expenses - - 0 55,545
Depreciation 82,619 17,976 116,451 17,976
Deposit on building - 65,390 0 65,390
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 5,943 (959) (53,175) 41,131
Inventories (21,599) (33,445) (45,110) (33,445)
Prepaid expenses and deposits 3,070 - (46,256) -
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 585,636 116,646 1,275,667 347,600
--------- --------- ---------- ----------
Net cash used for operating activities: (596,300) (152,565) (940,766) (101,065)
Cash Flows from Investing Activities
Additions to capital assets (3,207,598) (2,032,305) (3,239,350) (2,032,305)
--------- --------- ---------- ----------
Net cash used for investing activities: (3,207,598) (2,032,305) (3,239,350) (2,032,305)
Cash Flows from Financing Activities
Mortgages and other debt 690,780 2,009,780 1,022,568 2,009,780
Issuance of debentures 3,192,644 - 3,192,644 -
Issuance of capital stock - 28,719 - 220,180
Decrease in stock subscription receivable 33,302 - 96,774 -
Advances (to) from Director (88,581) 105,264 (130,984) (128,603)
--------- --------- ---------- ----------
Net cash provided from financing activities: 3,828,145 2,143,763 4,181,002 2,101,357
Change in foreign currency
translation adjustment (24,247) 62,632 (886) 41,657
Increase (decrease) in cash
and cash equivalents - 21,525 - 9,644
Cash and cash equivalents,
beginning of period $ - $ - $ - $ 11,881
--------- --------- ---------- ----------
Cash and cash equivalents,
end of period $ - $ 21,525 $ - $ 21,525
========= ========= ========== ==========
Supplemental disclosure of
cash flow information:
Interest paid $ 65,625 - $ 150,757 -
========= ========= ========== ==========
Income taxes paid - - - -
========= ========= ========== ==========
</table>
F-5
Supplemental disclosure of non-cash investing and financing transactions:
For the three months ended October 31, 2002, the Company:
On September 13, 2002 signed an agreement with D. Dunsmuir Investments Canada
Limited whereby the Company agreed to issue 500,000 free trading shares.
Although the shares have not yet been issued, the expense related to the
issuance of these shares of $100,000 has been accrued as a financing expense.
F-6
D'Angelo Brands, Inc.
Notes to Financial Statements
October 31, 2002
(Unaudited)
1. Summary of Significant Accounting Policies
Company Background and Nature of Business:
D'Angelo Brands, Inc. ("the Company") (formerly Playandwin, Inc.) was
incorporated under the laws of the State of Nevada on June 9, 1995. The Company
was incorporated under the name Cambridge Funding Group Inc. The Company
changed its name to Agriceutials Technologies, Inc., then to Playandwin, Inc.
and then to D'Angelo Brands, Inc.
D'Angelo Acquisitions Inc. is a wholly owned subsidiary of the Company and
D'Angelo Brands Ltd. is wholly owned by D'Angelo Acquisitions Inc. D'Angelo
Brands Ltd. produces and markets branded apple juice, apple cocktail and iced
tea. These products are distributed to major retail grocery chains in the
Ontario, Canada market.
1540633 Ontario Inc. is a wholly owned subsidiary of the Company which can
produce concentrates, juices, purees and blends, many of which can be used in
the various lines of D'Angelo beverages.
Acquisition and Change in Control:
The Company incorporated a wholly owned subsidiary named D'Angelo Acquisitions
Inc., ("Acquisitions") an Ontario corporation, which entered into a Share
Exchange Agreement (" the Agreement") with D'Angelo Brands Ltd. ("Brands"), an
Ontario Corporation. Pursuant to the Agreement dated October 29, 2001,
Acquisitions acquired 100% of the outstanding shares of common stock of Brands
in exchange for a total of 36,000,000 Exchangeable shares. The Exchangeable
shares are Class B Special Shares of Acquisitions, being subordinate, non-voting
special shares authorized in an unlimited number. The terms of the Exchangeable
shares are outlined in more detail in note 7 below. Pursuant to the Agreement,
the historical financial history of the Company is that of Brands, therefore
April 30, the fiscal year end of Brands was adopted.
F-7
In connection with the Share Exchange Agreement, the Company assigned to its
wholly owned subsidiary, Playandwin Canada Inc. (Playandwin Canada), all of its
licenses and rights to the racing wager game known as "RACINGO". The Company
also distributed, in the form of a stock dividend, all of the common shares of
Playandwin Canada to stockholders of record of the Company immediately before
the closing of the Share Exchange Agreement. The stock dividends were payable
November 20, 2001 to stockholders of record on October 29, 2001. On October 29,
2001 there were 701,257 Class B Special Shares of Playandwin Canada outstanding.
Each of these Class B shares may be exchanged for one common share of the
Company. To accommodate the exchange of shares, the Company issued a sufficient
number of common shares to a trustee for the benefit of the holders of the Class
B Playandwin Canada shares. The trustee will hold the common shares in trust
until all the conditions for the exchange of the Class B Playandwin Canada
shares have been satisfied.
Basis of Presentation:
The financial statements are prepared in accordance with generally accepted
accounting principles in the United States of America with the assumption that
the Company will be able to realize its assets and discharge its liabilities in
the normal course.
As reflected in the accompanying financial statements, the Company has had
recurring losses from operations, a negative cash flow from operations, and its
current liabilities exceed its current assets. These matters raise substantial
doubt about the Company's ability to continue as a going concern.
In view of the matters described in the preceding paragraph, recoverability of a
major portion of the recorded asset amounts shown in the accompanying
consolidated balance sheet is dependent upon continued operations of the
Company, which, in turn, is dependent upon the Company's ability to continue to
raise capital and generate positive cash flows from operations. The consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classifications of liabilities that might be necessary should the Company be
unable to continue its existence. Management plans to take the following steps
that it believes will be sufficient to provide the Company with the ability to
continue in existence:
* The Company is continuing to develop its business plan. Management expects
the Company to become profitable by its fiscal year ended April 30, 2004.
* Management expects to fund any negative cash flows or capital expenditures
from debt or equity financing or a combination thereof as deemed
appropriate by the Company's Board of Directors.
F-8
Basis of Consolidation:
The consolidated financial statements include the accounts of the Company and
its wholly owned and controlled subsidiaries.
Use of Estimates:
In preparing the Company's financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and reported amounts for revenue and expenses during
the period. Actual amounts could differ from those estimates.
Fair Value:
For certain of the Company's financial instruments, none of which are held for
trading, including cash, accounts receivable, accounts payable and liabilities,
the carrying amounts approximate fair value due to their short maturities. The
amounts shown for mortgages and other debt also approximate fair value because
current interest rates and terms offered to the Company for similar debt are
substantially the same.
Cash Equivalents:
For purposes of the statement of cash flows, cash equivalents include all highly
liquid debt instruments with original maturities of three months or less which
are not securing any corporate obligations.
Concentration of Credit Risk:
Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist of cash and accounts receivable. The Company places its
cash with a financial institution in Canada, which is not covered by the Canada
Deposit Insurance Corporation. The Company extends credit based on an evaluation
of the customer's financial condition, generally without collateral. Exposure to
losses on receivables is principally dependent on each customer's financial
condition. The Company monitors its exposure for credit losses and maintains
allowances for anticipated losses, if required.
F-9
Inventory:
Inventories are valued at the lower of cost (first-in, first-out basis) or
market.
Capital Assets:
Capital assets are stated at cost or net replacement amount. Depreciation, based
on the estimated useful lives of the assets, is provided on a straight-line
basis over the following periods:
Building 20 years
Manufacturing Equipment 10 years
Office Equipment 5 years
Trucks 3 years
Depreciation expense was $82,619 and $17,976 for the three months ended October
31, 2002 and 2001, respectively.
Revenue Recognition:
The Company recognizes sales upon shipment of goods to customers.
Impairment of Long-Lived Assets:
In accordance with SFAS No. 144, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of", long-lived assets to be
held and used are analyzed for impairment whenever events or changes in
circumstances indicate that the related carrying amounts may not be recoverable.
The Company evaluates at each balance sheet date whether events and
circumstances have occurred that indicate possible impairment. If there are
indications of impairment, the Company uses future undiscounted cash flows of
the related asset or asset grouping over the remaining life in measuring whether
the assets are recoverable. In the event such cash flows are not expected to be
sufficient to recover the recorded asset values, the assets are written down to
their estimated fair value. Long- lived assets to be disposed of are reported at
the lower of carrying amount or fair value of asset less cost to sell.
F-10
Advertising Costs:
Advertising costs are expensed as incurred. Advertising expense includes costs
related to promoting the D'Angelo brand name and amounted to $0 for the three
months ended October 31, 2002 and October 31, 2001.
Translation of Foreign Currency:
The Company translates the foreign currency financial statements of its
subsidiaries in accordance with the requirements of SFAS No. 52, "Foreign
Currency Translation". Assets and liabilities are translated at current exchange
rates and related revenues and expenses are translated at average exchange rates
in effect during the period. Resulting translation adjustments are recorded as a
separate component in stockholders' equity (deficiency). Foreign currency
transaction gains and losses are included in determining net income.
Income Taxes:
The Company accounts for income taxes pursuant to Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". Deferred
taxes are provided on a liability method whereby deferred tax assets are
recognized for deductible temporary differences, and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
Net Loss per Common Share:
The Company calculates net loss per share based on SFAS No. 128, "Earnings Per
Share". Basic loss per share is computed by dividing net loss attributable to
common stockholders by the weighted average number of common shares outstanding.
Diluted loss per share is computed similar to basic loss per share except that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive. At October 31, 2002, the
weighted average common shares outstanding would have been increased by
45,854,396 shares of the Company's common stock if the exchangeable shares and
issued share purchase warrants had been dilutive.
F-11
Comprehensive Income:
SFAS No. 131 "Reporting Comprehensive Income", establishes standards for the
reporting and displaying of comprehensive income and its components in the
financial statements. In accordance with SFAS No. 52, the Company has a Foreign
Currency Translation Adjustment. This is a component of the Company's
Comprehensive Loss, which is displayed as a component of the Statement of
Operation and Comprehensive Loss.
Recently Issued Accounting Pronouncements: In June 2001, the FASB
issued SFAS No. 141, "Business Combinations." SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. Goodwill and certain intangible assets will remain on the
balance sheet and not be amortized. On an annual basis, and when there is reason
to suspect that their values have been diminished or impaired, these assets must
be tested for impairment, and write downs may be necessary. The Company adopted
SFAS No. 141 on July 1, 2001 and the adoption did not have an effect on the
Company's financial position or results of operations.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 changes the accounting for goodwill from an amortization
method to an impairment-only approach. Amortization of goodwill, including
goodwill recorded in past business combinations, will cease upon adoption of
this statement. The Company was required to implement SFAS No. 142 on January 1,
2002 and the adoption did not have an effect on the Company's financial position
or results of operation.
In October 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," which requires companies to record the fair value of a liability
for asset retirement obligations in the period in which they are incurred. The
statement applies to a company's legal obligations associated with the
retirement of a tangible long-lived asset that results from the acquisition,
construction, and development or through the normal operation of a long-lived
asset. When a liability is initially recorded, the company would capitalize the
cost, thereby increasing the carrying amount of the related asset. The
capitalized asset retirement cost is depreciated over the life of the respective
asset while the liability is accredited to its present value. Upon settlement of
the liability, the obligation is settled at its recorded amount or the company
incurs a gain or loss. The statement is effective for fiscal years beginning
after June 30, 2002. The Company does not expect the adoption to have a material
impact to the Company's financial position or results of operations.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". Statement 144 addresses the accounting and
reporting for the impairment or disposal of long-lived assets. The statement
provides a single accounting model for long-lived assets to be disposed of. New
criteria must be met to classify the asset as an asset held-for-sale. This
statement also focuses on reporting the effects of a disposal of a segment of a
business. The Company does not expect the adoption to have a material impact to
the Company's financial position or results of operations.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Correction
(issued 4/02)," which the Company does not believe will materially affect its
financial statements.
F-12
In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities, which addresses financial accounting and reporting
for costs associated with exit or disposal activities and supersedes EITF No.
94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring.)
The Company does not expect the adoption to have a material impact on the
Company's financial position or results of operations.
2. Comparative Information
Management has determined that certain information included in the
financial statements previously issued by the Company for the quarters ended
October 31, 2001 and January 31, 2001 were materially incorrect. The Company has
restated, in the financial statements, the financial information for the quarter
ended October 31, 2001 and will restate the financial information for the
quarter ended January 31, 2002. The incorrect information for the quarters ended
October 31, 2001 and January 31, 2002 will not require restatement of the
financial statements for the entire fiscal year ended April 30, 2002.
3. Acquisition
On September 23, 2002, the Company acquired, through its wholly owned
subsidiary 1540633 Ontario Inc. ("Ontario"), property and equipment located in
Tiverton, Ontario ("Tiverton Facility") from Mintz and Partners in its capacity
as the receiver and manager of the assets and property of QTF Foods Inc. The
Tiverton Facility will be used for the production of concentrates, juices,
purees and blends.
The purchase price of $3,192,644 for the Tiverton Facility has been
allocated to the assets acquired based on estimates of their fair market value
at the date of acquisition and was financed as outlined under long term debt
(Note 6).
4. Capital Assets
<table>
<caption>
October 2002
------------------------------------------
Cost Accumulated Net Carrying
Amortization Amount
----------- ------------ ------------
<s> <c> <c> <c>
Land 1,071,410 - 1,071,410
Building 1,684,668 68,863 1,615,805
Manufacturing Equipment 3,171,280 79,339 3,091,940
Office Equipment 13,863 1,404 12,459
Trucks 73,431 41,280 32,151
------------------------------------------
6,014,652 190,886 5,823,765
</table>
5. Mortgages and Other Debt
October 2002
----------------
First mortgage on the property located at 14 1,596,322
Brewster Road, Brampton Ontario, Canada ("the
Property"). The mortgage matures on May 1, 2003.
The interest rate is 10.5% per annum and is
payable monthly on the first of every month.
Second mortgage on the Property owed to
D.Dunsmuir Investments Canada Limited. The 415,044
mortgage bears interest at 16% per annum and is
payable monthly. The principal was due February
9, 2002 but was renewed on a month to month
basis after this date under the same terms.
Third mortgage on the Property owed to Reagens
Canada Ltd. The mortgage bears interest at 20% 118,128
per annum payable monthly. The principal was due
January 28, 2002 but was renewed on a month to
month basis after this date under the same
terms.
Promissory demand note owed to D. Dunsmuir
Investments Canada Limited jointly and severally
with an officer of the Company ("The Note"). The
Note bears interest at 16% per annum up to May
1, 2002 and 20% per annum thereafter until the
date of repayment. The principal may be repaid,
in whole or in part, at any time with or without
notice. The Note is secured by:
i) a general security agreement covering all
assets of D'Angelo Brands Ltd. including
inventory, equipment and accounts receivable.
ii) fourth registered charge on the Property
iii) first registered charge on all production 702,382
equipment
Promissory demand note owed to David Stewart 159,632
jointly and severally with an officer of the
company. The note bears interest at 5% per annum
to the date of payment. The principal may be
repaid, in whole or in part, at any time with or
without notice.
Promissory demand note advanced from D. Dunsmuir 319,264
Investments Canada Limited. Interest on the
promissory note is payable monthly at the rate
of 14% per annum up to and including August 21,
2002 and at the rate of 20% per annum from
August 22, 2002 to the date of repayment in
full.
Promissory demand note advanced from D.
Dunsmuir Investments Canada Limited. 766,235
Interest on the promissory note is payable
monthly at the rate of 20% per annum from
October 1, 2002 to the date of repayment
in full.
-----------
Total 4,077,007
F-14
6. Long Term Debt
On September 23, 2002, 1540633 Ontario Inc. issued a debenture in the
amount of $3,192,644 ("Principal Amount") to Wasanda Enterprises Inc. (the
"Holder"). The debenture was issued to finance the purchase of the Tiverton
Facility. The Principal Amount of the debenture is due May 19, 2004, provided
that Ontario may repay the Principal Amount in whole or in part at any time
without notice or bonus. The Principal Amount shall bear interest, at the
interest rate charged by the Bank of Montreal (Toronto Main Branch) for demand
loans in Canadian dollars to its most creditworthy commercial borrowers
("Interest Rate"). Interest on the Principal Amount shall accrue, compound and
be added to the Principal Amount from September 19, 2002 to December 19, 2002.
Thereafter interest shall be paid on the Principal Amount then outstanding from
January 19, 2003 on the last day of every month until the debenture is due.
Security for the payment of the principal and interest payable under this
debenture is:
a) specific charge of real and personal property by way of a fixed and
specific mortgage and charge to and in favour of the Holder on all lands, other
real and immovable property, all goods, chattels, fixtures, plant, vehicles,
machinery equipment and accessories of every nature of "Ontario".
b) floating charge in favour of the Holder on all property and assets
of every nature of "Ontario".
F-15
7. Class B Common Stock
In connection with the Company's acquisition of D'Angelo Acquisitions Inc., as
outlined in note 1 above, 36,000,000 Exchangeable Shares of Acquisitions were
issued. The Exchangeable Shares issued were further described as Class B
Special, subordinated, non-voting special shares. Each share is exchangeable
into one share of the Company's common stock subject to the terms as follows:
a) each exchangeable share may be exchanged for one common share of the
Company at any time during the period ending on and including the day of
the fifth anniversary of the closing date. (October 29, 2001)
b) each exchangeable share may be exchanged for one common share at the
request of Acquisitions:
i) on the occurrence of a take over bid for all of the issued and
outstanding shares of the Company; or
ii) after the fifth anniversary of the closing date;
c) in case the Company shall :
i) subdivide its outstanding common shares into a greater number of
shares; or
ii) consolidate its outstanding common shares into a smaller number of
shares; or
iii) issue common shares of the Company to the holders of its
outstanding common shares by way of a stock dividend, then the number of
Company shares into which the Exchangeable Shares may be converted on the
effective date of such subdivision or consolidation or on the record date for
such stock dividend, as the case may be, shall, in the case of the events
referred to in i) and ii) above, be decreased in proportion to the total number
of common shares of the Company resulting from such subdivision or issue, or
shall, in the case of the event referred to in ii) above, be increased in
proportion to the total number of outstanding common shares of the Company
resulting from such consolidation; and
d) the adjustments provided for in c) above are cumulative and shall apply
to successive dividends, distributions, subdivisions, consolidations,
issues or other events resulting in any adjustment under the provisions
of c) above;
e) all of the foregoing rights, privileges and conditions and the exercise
or fulfillment thereof shall be subject to the relevant securities laws.
F-16
8. Significant Customer
For the three months ended October 31, 2002, one customer accounted for
approximately 60% and another customer accounted for approximately 27% of the
Company's sales.
9. Warrants
On September 23, 2002, the Company issued a warrant to Wasanda Enterprises Inc.
to acquire, at any time in whole or in part, until September 23, 2007, fifteen
million (15,000,000) common shares from the Company with an exercise price of
thirty cents ($0.30) per common share. The warrant has not been registered under
the Securities Act of 1934 and may only be sold or transferred in compliance
with the registration requirements of the Act and any applicable securities laws
or an exemption therefrom.
10. Related Party Transactions
D'Angelo Brands Ltd. has entered into a 25 year Royalty Agreement for the use of
intellectual property (i.e. Trademarks etc.) held by a related Company under
common control. The agreement requires Brands to pay 3% of gross revenue from
sales of all branded products. D'Angelo Brands Ltd. Is obligated to pay a
minimum of $191,410 to a maximum of $510,428 in royalties during each calendar
year. The agreement commenced on March 22, 2001. As of October 31, 2002,
$324,501, had been accrued but not paid.
As of October 31, 2002, $422,064 was owed to the Company by a director and
officer. The Advances are non-interest bearing.
In connection with the Share Exchange Agreement outlined in note 1 above, the
Company entered into a Settlement Agreement with Stewart Garner, its former
President. Under the terms of the agreement, the Company is to pay Mr. Garner
the sum of $70,000 in ten equal monthly payments of $7,000 each. The payments
are payable on the 15th of each month commencing on November 15th 2001. As of
October 31, 2002, the $70,000 has been accrued but no payments had been made.
11. Commitments and Contingencies
A claim was issued in the Ontario Supreme Court of Justice on August 7, 2001 on
behalf of D'Angelo Brands Ltd. v. Les Aliments Lexus Foods Inc. The claim is an
action for outstanding commissions in the amount of $63,000 plus $319,000 in
general damages for breach of contract. Les Aliments Lexus Foods defended the
claim and subsequently counterclaimed for damages and breach of contract in the
amount of $191,000 and for fraud and negligent misrepresentation for the same
amount. Additionally, Les Aliments has expressed an intent to obtain an order
amending its statement of defense and counterclaim to include the same claims as
before and, in addition, a declaration that Les Aliments has the right, title
and interest in the D'Angelo trademarks. To date, however, Les Aliments has not
taken any steps to obtain the order for the amendment. It is the opinion of
management and legal counsel that the counterclaim by Les Aliments is spurious
and simply an attempt to discourage pursuit of the commissions owing to D'Angelo
Brands Ltd. It is the opinion of management that the two claims will be settled
without any significant cost to either side.
F-17
On or about May 29, 2002, the Company had not registered, within 180 days, the
600,000 shares as required per a Registration Rights Agreement with Penguin
Petroleum Products Inc. ("Penguin") dated November 30, 2001. As a result, as
per the Registration Rights Agreement, Penguin will receive an additional
300,000 registerable securities of the Company. The Company recorded an expense
for this penalty in the amount of $45,000, the fair market value for these
shares on the date of the breach. In July 2002 an agreement was signed with
Penguin Petroleum Products Inc. ("Penguin") whereby the Company agreed to issue
600,000 free trading shares to Penguin. Although the shares have not yet been
issued, the expense related to the issuance of these shares of $123,000 has been
accrued as a financing expense. On September 6, 2002, the Company signed a
registration rights agreement with Penguin which replaced the registration
rights agreement with Penguin dated November 30, 2001. The Company agreed to
register a total of 2,500,000 shares of its common stock before March 5, 2003.
On June 21, 2002, $317,360 was advanced from D. Dunsmuir Investments Canada
Limited for a demand promissory note in the same amount. In consideration of
the advance, the Company agreed to issue 500,000 free trading shares of the
Company's common stock, with a fair market value of $120,000, to D. Dunsmuir
Investments Canada Limited. Although the shares have not yet been issued, the
expense related to the issuance of these shares of $120,000 has been accrued as
a financing expense.
On September 13, 2002, $766,235 was advanced from D. Dunsmuir Investments Canada
Limited for a demand promissory note owed jointly and severally by the Company
and an officer of the Company. In connection with promissory note the Company
agreed to issue 500,000 free trading shares of the Company's common stock and
issue warrants to purchase in total 4,000,000 free trading shares of the Company
at any time prior to September 13, 2007 at $.175 per share. Although the shares
have not yet been issued, the expense related to the issuance of these shares of
$100,000 has been accrued as a financing expense.
On September 23, 2002, in conjunction with Wasanda Enterprises Inc. providing
financial support to "Ontario" in the form of vendor take-back security to
finance the acquisition of the Tiverton Facility as further described in note 3,
the Company and "Brands", jointly and severally, guaranteed the payment of all
interest and principal owing under the debenture and any other indebtedness or
liability owed to the Holder.
The Company's future minimum annual lease payments required under operating
leases that have initial or non cancelable lease terms in excess of one year
owing over the next 5 years are as follows:
For the three months ended
October 31, 2003 $31,208
October 31, 2004 $29,404
October 31, 2005 $12,688
October 31, 2006 $ 7,992
F-18
12. Income Taxes
The components of the provision for income taxes is as follows:
2002 2001
Current tax expense:
Canada - -
United States - -
====== =====
Total Current - -
====== =====
Deferred tax expense:
Canada - -
United States - -
Total Deferred ====== =====
- -
====== =====
Total tax provision from
continuing operations - -
====== =====
F-19
Deferred tax assets and liabilities reflect the net effect
of temporary differences between the carrying amount of
assets and liabilities for book purposes and amounts used
for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities are as
follows:
2002 2001
---------- --------
Deferred Tax Assets:
Loss carry forwards 2,048,304 267,485
Other temporary differences 90,418 449
Less valuation allowance (2,138,722) (267,934)
---------- --------
Net Deferred tax assets - -
---------- --------
At October 31, 2002, the Company has provided a valuation allowance for the
deferred tax asset since, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax asset is not realizable. Net
operating loss carry forwards expire starting in 2007.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and related footnotes for the
quarterly period ended October 31, 2002 included in its Quarterly Report on Form
10 - QSB.
RESULTS OF OPERATIONS
Comparing the three months ended October 31, 2002 to the three months ended
October 31, 2001
Sales. For the three months ended October 31, 2002, sales were $894,983, an
increase of $851,736 over the $43,247 sales for the three months ended October
31, 2001. The increase in sales resulted from the sales of beverage products
which began to be produced in the Company's manufacturing facility in April
2002.
Gross Profit. Gross profit was ($66,715) for the three months ended October 31,
2002, a decrease of $46,167 compared to gross profit of ($20,548) for the three
months ended October 31, 2001. The decrease in gross profit was primarily
attributable to costs of preparing the new Tiverton Facility for production.
Selling, Marketing, Distribution and Warehousing Expenses. Selling, marketing,
distribution and warehousing expenses were $192,291 for the three months ended
October 31, 2002, an increase of $122,915 over selling, marketing, distribution
and warehousing expenses of $69,376 for the three months ended October 31, 2001.
This increase was due to higher salaries and higher expenses to operate the
warehouse which was acquired later in 2001.
2
General and Administrative Expenses. General and administrative expenses were
$316,276 for the three months ended October 31, 2002, an increase of $233,256
over general and administrative expenses of $83,020 for the three months ended
October 31, 2001. The increase was due to higher salaries, higher amortization
and higher legal and accounting expenses. The higher legal and accounting
expenses are primarily as a result of the Company becoming a publicly reporting
company pursuant to securities laws.
Financing Expenses. Financing expenses were $513,879 for the three months ended
October 31, 2002, an increase of $395,465 over the financing expenses of
$118,414 for the three months ended October 31, 2001. The increase was a result
of the commitment fee of $383,117 and commitment to issue 500,000 free trading
shares for the note advanced from D. Dunsmuir Investments Canada Limited.
Interest. Interest was $162,808 for the three months ended October 31, 2002, an
increase of $107,189 over interest of $55,619 for the three months ended October
31, 2001. The increase was a result of financing the warehouse, corporate office
and the two manufacturing facilities.
Provision for Income Taxes. As the Company generated losses, no provision has
been made for income taxes.
Net Loss. Net Loss was $1,251,969 for the three months ended October 31, 2002,
an increase of $933,796 over the net loss of $318,173 for the three months ended
October 31, 2001. The increase in the net loss was a result of lower gross
profit and higher selling, marketing, distribution, warehousing, general and
administrative expenses, financing expenses and interest.
Comparing the six months ended October 31, 2002 to the six months ended October
31, 2001
Sales. For the six months ended October 31, 2002, sales were $1,638,961, an
increase of $1,296,735 over the $342,226 sales for the six months ended October
31, 2001. The increase in sales resulted from the sales of beverage products
which began to be produced in the Company's manufacturing facility in April
2002.
3
Gross Profit. Gross profit was ($183,164) for the six months ended October 31,
2002, a decrease of $156,272 compared to gross profit of ($26,892) for the six
months ended October 31, 2001. The decrease in gross profit was primarily
attributable to higher repair and maintenance costs, product development costs
and ingredients and packaging usage waste related to the start-up of the new
production line in April 2002. In addition rent, property taxes, utilities,
insurance and indirect labour and other fixed costs were incurred on the
Mississauga manufacturing facility in this start-up period of relatively low
production as well as costs of preparing the new Tiverton Facility for
production.
Selling, Marketing, Distribution and Warehousing Expenses. Selling, marketing,
distribution and warehousing expenses were $346,040 for the six months ended
October 31, 2002, an increase of $173,826 over selling, marketing, distribution
and warehousing expenses of $172,214 for the six months ended October 31, 2001.
This increase was due to higher salaries and higher expenses to operate the
warehouse which was acquired later in 2001.
General and Administrative Expenses. General and administrative expenses were
$587,234 for the six months ended October 31, 2002, an increase of $339,056 over
general and administrative expenses of $248,178 for the six months ended October
31, 2001. The increase was due to higher salaries, higher amortization and
higher legal and accounting expenses. The higher legal and accounting expenses
are primarily as a result of the Company becoming a publicly reporting company
pursuant to securities laws.
Financing Expenses. Financing expenses were $801,879 for the six months ended
October 31, 2002, an increase of $626,932 over the financing expenses of
$174,947 for the six months ended October 31, 2001. The increase was a result of
the commitment fee of $383,117 and commitment to issue 500,000 free trading
shares for the note advanced from D. Dunsmuir Investments Canada Limited and a
result of providing for shares to be issued at below market value to Penguin
Petroleum Products Inc. and D. Dunsmuir Investments Canada Limited.
4
Interest. Interest was $270,026 for the six months ended October 31, 2002, an
increase of $214,407 over interest of $55,619 for the six months ended October
31, 2001. The increase was a result of financing the warehouse, corporate office
and the two manufacturing facilities.
Provision for Income Taxes. As the Company generated losses, no provision has
been made for income taxes.
Net Loss. Net Loss was $2,188,343 for the six months ended October 31, 2002, an
increase of $1,593,081 over the net loss of $595,262 for the six months ended
October 31, 2001. The increase in the net loss was a result of lower gross
profit and higher selling, marketing, distribution, warehousing, general and
administrative expenses, financing expenses and interest.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 2002, the Company had a working capital deficiency of
$7,341,233 compared to a working capital deficiency of $5,187,539 as of April
30, 2002. The decrease in working capital was a result of financing the cash
losses and manufacturing equipment purchases through the use of short term
financing in the form of accounts payable, accrued liabilities and other short
term debt.
Net cash used for operating activities was $596,300 for the three months ended
October 31, 2002, an increase of $443,735 from the $152,565 net cash used for
operating activities for the three months ended October 31, 2001. Net cash used
for operating activities was $940,766 for the six months ended October 31, 2002
an increase of $839,701 from the $101,065 net cash used for operating activities
for the six months ended October 31, 2001. The increase in both periods resulted
mainly from the net loss offset partially by the increase in accounts payable
and accrued liabilities.
Net cash used for investing activities for the three months ended October 31,
2002 was $3,207,598 as compared to $2,032,305 net cash used for investing
activities for the three months ended October 31, 2001. Net cash used for
investing activities for the six months ended October 31, 2002 was $3,239,350 as
compared to $2,032,305 net cash used for investing activities for the six months
ended October 31, 2001. The increase in net cash used for investing activities
as compared to the prior year in both periods was primarily a result of the
purchase of the processing facility and equipment located in Tiverton, Ontario.
On September 23, 2002, the Company acquired, through its wholly owned subsidiary
1540633 Ontario Inc. ("Ontario"), property and equipment located in Tiverton,
Ontario ("Tiverton Facility") from Mintz and Partners in its capacity as the
receiver and manager of the assets and property of QTF Foods Inc. The purchase
price for the Tiverton Facility was $3,192,644.
5
Net cash provided from financing activities for the three months ended October
31, 2002 was $3,828,145 as compared to the $2,143,763 net cash provided from
financing activities for the three months ended October 31, 2001. Net cash
provided from financing activities for the six months ended October 31, 2002 was
$4,181,002 as compared to $2,101,357 net cash provided from financing activities
for the six months ended October 31, 2001. The increase in net cash provided
from financing activities was a result of the increase in mortgages and other
debt as well as the issuance of the debenture as outlined in note 6.
On September 13, 2002, $756,240 was advanced from D. Dunsmuir Investments Canada
Limited for a demand promissory note owed jointly and severally by the Company
and an officer of the Company. The note bears interest payable monthly at 20%
per annum until the date of repayment, provided no interest shall be payable if
the principle is repaid on or before September 30, 2002. In connection with
promissory note the Company agreed to pay a commitment fee of $378,120, issue
500,000 free trading shares of the Company's common stock and issue warrants to
purchase in total 4,000,000 free trading shares of the Company at any time prior
to September 13, 2007 at $.175 per share. The financing was used to repay
$94,530 of the promissory note owed to David Stewart and the remainder for
working capital requirements.
On September 23, 2002, 1540633 Ontario Inc. issued a debenture in the amount of
$3,192,644 ("Principal Amount") to Wasanda Enterprises Inc. (the "Holder"). The
debenture was issued to finance the purchase of the Tiverton Facility. The
Principal Amount of the debenture is due May 19, 2004, provided that Ontario may
repay the Principal Amount in whole or in part at any time without notice or
bonus. The Principal Amount shall bear interest, at the interest rate charged
by the Bank of Montreal (Toronto Main Branch) for demand loans in Canadian
dollars to its most creditworthy commercial borrowers ("Interest Rate").
Interest on the Principal Amount shall accrue, compound and be added to the
Principal Amount from September 19, 2002 to December 19, 2002. Thereafter
interest shall be paid on the Principal Amount then outstanding from January
19, 2003 on the last day of every month until the debenture is due.
6
The Company has certain cash requirements to expand its business, execute its
sales and marketing goals; fund working capital needs and pay down commitments
including interest and principal payments on the mortgages and other debt which
all matures in the next year. Management estimates that in excess of $7,000,000
will need to be repaid or refinanced over the next fiscal year in addition to
the current trade liabilities it is incurring.
The Company is currently in discussions and negotiations to obtain the financing
required to meet these obligations as they become due. The financing may be in
the form of debt or equity or a combination thereof. As a result of the
Company's current financial condition, there is no assurance that the financing
will be obtainable on favourable terms or at all.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Management has determined that certain information included in the financial
information filed by the Company on Form 10-QSB for the quarters ended October
31, 2001 and January 31, 2001 was materially incorrect. The Company has
restated, the financial information for the quarter ended October 31, 2001 in
this 10-QSB and will restate the financial information for the quarter ended
January 31, 2002. The incorrect information included in the reports for the
quarters ended October 31, 2001 and January 31, 2002 will not require the
Company to restate the financial information included in the Form 10-KSB for the
year-ended April 30, 2002, which was filed with the Securities and Exchange
Commission on August 13, 2002.
7
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. Description
2.1 Share Exchange Agreement (incorporated by reference to
exhibit 2.1 to the Company's Current Report on Form 8-K
filed with the Commission on January 15, 2002).
3.1(a) Articles of Incorporation (incorporated by reference to
Exhibit 3.1 to the Amended Form 10-SB filed with the
Commission on May 31, 2000).
3.1(b) Certificate of Change in Authorized Shares Pursuant to NRS
78.209 (incorporated by reference to Exhibit 4.3 to the
Company's Registration Statement on Form S-8 filed with the
Commission October 9, 2001).
3.1(c) Certificate of Amendment re Name Change (incorporated by
reference to Exhibit 3.1 to the Company's Current Report on
Form 8-K filed with the Commission on January 15, 2002).
3.2 Restated By-laws (incorporated by reference to Exhibit 4.4
to the Company's Registration Statement on Form S-8 filed
with the Commission on October 9, 2001).
10.1 Demand promissory note to D. Dunsmuir Investment Canada
Limited, dated September 13, 2002 attached;
10.2 Agreement to pay loan commitment fee, issue warrants and
free trading shares to D. Dunsmuir Investments Canada
Limited, dated September 13, 2002 attached;
10.3 Warrant, dated September 23, 2002, from the Company to
Wasanda Enterprises Inc. (Incorporated by reference to
exhibit 99.2 to the Schedule 13D/A filed with the
Commission on October 9, 2002)
10.4 Form of Offer, dated September 23, 2002, from 1540633
Ontario Inc. to Mintz & Partners Limited to purchase
property and fixed assets of QTF Foods Inc. (Incorporated
by reference to exhibit 99.3 to the Schedule 13D/A filed
with the Commission on October 9, 2002)
10.5 Debenture, dated September 23, 2002, issued by 1540633
Ontario Inc. to Wasanda Enterprises Inc. (incorporated by
reference to exhibit 99.4 to the Schedule 13D/A filed with
the Commission on October 9, 2002)
10.6 Guarantee and Postponement of Claim dated, September 23,
2002, issued by the Company and D'Angelo Brands Ltd.
jointly and severally to Wasanda Enterprises Inc.
(incorporated by reference to exhibit 99.5 to the Schedule
13D/A filed with the Commission on October 9, 2002)
99.1 Certifications pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 attached.
8
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
D'Angelo Brands, Inc.
By: /s/ Frank D'Angelo
----------------
Frank D'Angelo
President and Principal Accounting Officer
Dated: December 23, 2002
CERTIFICATIONS PURSUANT TO RULE 13a-14
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I Frank D'Angelo, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of D'Angelo Brands,
Inc;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and I have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date"); and
c. presented in this quarterly report my conclusions about the
effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the registrant's
auditor's and the audit committee of registrant's board of director's (or
persons performing the equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: December 23, 2002
By: /s/ Frank D'Angelo
----------------
Frank D'Angelo
President and Principal Accounting Officer
9