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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2003
[ ] 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:
23,449,589 Class A Common shares and 28,887,670 Class B Common shares as at
March 14, 2003.
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.
CONTENTS PAGE
- ---------- -------------
Consolidated Balance Sheets as at January 31, 2003
(unaudited) and April 30, 2002................................ F-1
Consolidated Statements of Operations and Comprehensive Loss
for the three months and nine months ended January 31 2003
and 2002(Unaudited)........................................... F-2
Consolidated Statements of Stockholder's Equity (Deficiency)
(Unaudited)................................................... F-3
Consolidated Statements of Cash Flows for the three months
and nine months ended January 31, 2003 and 2002(Unaudited)..... F-5
Notes to the Consolidated Financial Statements (Unaudited).... F-7
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F-1
D'Angelo Brands, Inc. And Subsidiaries
Consolidated Balance Sheets
As at January 31, 2003 (unaudited) and April 30, 2002
<table>
<caption>
<s> <c> <c>
January 31 April 30
2003 2002
------------ ------------
ASSETS (unaudited)
Current
Accounts receivable $ 66,211 $ 17,905
Inventories 97,910 98,205
Prepaid expenses and deposits 104,255 19,146
------------ ------------
268,376 135,256
------------ ------------
Capital Assets, Net 5,850,176 2,700,866
$ 6,118,552 $ 2,836,122
============ ============
LIABILITIES
Current
Accounts payable and accrued liabilities $ 3,601,219 $ 2,268,356
Mortgages and other debt 4,602,552 3,054,439
------------ ------------
8,203,771 5,322,795
Long Term Debt 3,308,284 -
Commitment & Contingencies (Note11) - -
------------ ------------
$ 11,512,055 $ 5,322,795
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, par value $0.001;
Class A - 200,000,000 shares authorized;
23,449,589 and 15,487,259 shares issued and outstanding $ 23,450 $ 15,487
Class B - 50,000,000 shares authorized;
28,887,670 and 35,950,000 shares issued and outstanding 28,888 35,950
Additional paid-in capital 3,653,677 3,573,577
Stock Subscription Receivable - (96,774)
Advances to Director (141,422) (291,080)
Accumulated Other Comprehensive Gain (Loss) (70,880) 34,172
Accumulated Deficit (8,887,215) (5,758,005)
------------ ------------
(5,393,503) (2,486,673)
------------ ------------
$ 6,118,552 $ 2,836,122
============ ============
</table>
F-2
D'Angelo Brands, Inc. And Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss
for the three months and nine months ended January 31, 2003 and 2002
(Unaudited)
<table>
<caption>
<s> <c> <c> <c> <c>
Three months ended January 31 Nine months ended January 31
----------------------------- ---------------------------
2003 2002 2003 2002
--------- --------- ---------- ----------
(restated - (restated -
note 2) note 2)
Sales $ 654,962 $ - $ 2,293,923 $ 342,214
Cost of Sales 906,040 57,262 2,728,165 372,584
--------- --------- ---------- ----------
Gross Profit (251,078) (57,262) (434,242) (30,370)
Commission Income - 777 - 29,581
--------- --------- ---------- ----------
(251,078) (56,485) (789)
Selling, Marketing, Distribution and Warehousing Expenses 184,555 66,648 530,595 238,862
General and Administrative Expenses 294,705 67,356 881,939 315,534
--------- --------- ---------- ----------
479,260 134,004 1,412,534 554,396
--------- --------- ---------- ----------
Loss before other expenses (730,338) (190,489) (1,846,776) (555,185)
--------- --------- ---------- ----------
Other Expenses
Financing Expenses 12,288 686,452 814,167 857,718
Interest 198,241 91,481 468,267 150,781
--------- --------- ---------- ----------
210,529 777,933 1,282,434 1,008,499
--------- --------- ---------- ----------
Loss before income taxes (940,867) (968,422) (3,129,210) (1,563,684)
Provision for income taxes - - - -
--------- --------- ---------- ----------
Net Loss (940,867) (968,422) (3,129,210) (1,563,684)
Other comprehensive gain (loss), net of taxes -
foreign currency translation (104,166) (1,274) (105,052) 40,383
---------- --------- ---------- ----------
Comprehensive Loss ($1,045,033) ($969,696) ($3,234,262) ($1,523,301)
========== ========= ========== ==========
Loss per common share, basic and diluted ($0.04) ($0.12) ($0.16) ($0.06)
========== ========= ========== ==========
Weighted average number of common shares
outstanding, basic and diluted 22,971,430 7,794,759 19,717,442 26,310,817
========== ========= ========== ==========
</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 January 31, 2002 9,257,259 $9,257 36,000,000 $36,000 $2,042,957
Conversion of Class-B to Class-A shares 50,000 $ 50 ($50,000) ($50) -
Shares issued for cash 500,000 $ 500 $ 47,887
Expenses for shares sold below market value $ 11,613
Shares issued for services rendered 5,680,000 $5,680 $1,471,120
Advances to Director
Foreign Currency Transaction 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
Advance to Director
Foreign Currency Transaction Adj.
Net Loss
--------------------------------------------------------------------------
Balance at July 31, 2002 20,582,863 $ 20,583 30,854,396 $30,854 $3,573,577
Stock subscription receivable
Advance to Director
Foreign Currency Transaction Adj.
Net Loss
--------------------------------------------------------------------------
Balance at October 31, 2002 20,582,863 $20,583 30,854,396 $30,854 $3,573,577
Conversion of Class-B to Class-A shares 1,966,726 $ 1,967 (1,966,726) ($1,967)
Shares issued for cash 500,000 $ 500 $ 32,212
Expenses for shares sold below market value $ 12,288
Shares issued as per agreement 400,000 $ 400 $ 35,600
Advances to Director
Foreign Currency Transaction Adj.
Net Loss
----------------------------------------------------------------------------
Balance at January 31, 2003 23,449,589 $23,450 28,887,670 $28,888 $3,653,677
F-4
<c> <c> <c> <c> <c>
Stock Advances to Accumulated Other Accumulated Stockholders
Subscription Director Comprehensive Deficit Equity
Receivable Gain /(Deficiency)
----------- --------- --------- ---------- ----------
Balance at January 31,2002 ($96,774) ($230,678) $74,845 ($2,548,543) $ (712,936)
Conversion of Class-B to Class-A shares $ 0
Shares issued for cash $ 48,387
Expenses for shares sold below market value $ 11,613
Shares issued for services rendered $ 1,476,800
Advances to Director ($60,402) $ (60,402)
Foreign Currency Transaction Adj. ($40,673) $ (40,673)
Net Loss ($3,209,462) $(3,209,462)
------------------------------------------------------------------------------------------
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
Advance to Director ($42,403) ($42,403)
Foreign Currency Transaction 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
Advance to Director ($88,581) ($88,581)
Foreign Currency Transaction 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)
Conversion of Class-B to Class-A shares 0
Shares issued for cash $ 32,712
Expenses for shares sold below market value $ 12,288
Shares issued as per agreement $ 36,000
Advances to Director $280,642 $ 280,642
Foreign Currency Transaction Adj. ($104,166) ($104,166)
Net Loss ($940,867) ($940,867)
------------------------------------------------------------------------------------------------
Balance at January 31, 2003 $ 0 ($141,422) ($70,880) ($8,887,215) ($5,393,503)
</table>
F-5
D'Angelo Brands, Inc. And Subsidiaries
Consolidated Statements of Cash Flows
for the three months and nine months ended January 31, 2003 and 2002
(Unaudited)
<table>
<caption>
<s> <c> <c> <c> <c>
Three months ended January 31 Nine months ended January 31
----------------------------- ---------------------------
2003 2002 2003 2002
--------- --------- ---------- ----------
(restated - (restated -
note 2) note 2)
Cash Flows from Operating Activities
Net loss ($940,867) ($968,422) ($3,129,210) ($1,563,684)
Adjustments to reconcile net loss to
net cash used for operating activities:
Write-off of deferred expenses - - - 55,545
Depreciation 107,750 21,609 224,201 39,585
Deposit on building - - - 65,390
Expense for Shares sold below market value 12,288 686,452 12,288 686,452
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 4,869 21,009 (48,306) 62,140
Inventories 45,405 (132) 295 (33,577)
Prepaid expenses and deposits (38,853) - (85,109) -
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities 57,196 197,885 1,332,863 545,485
--------- --------- ---------- ----------
Net cash used for operating activities: $(752,212) (41,599) (1,692,978) (142,664)
Cash Flows from Investing Activities
(Additions to) Disposition of capital assets $(134,162) 4,981 (3,373,512) (2,027,324)
--------- --------- ---------- ----------
Net cash (used for) investing activities: (134,162) 4,981 (3,373,512) (2,027,324)
Cash Flows from Financing Activities
Mortgages and other debt 525,545 (14,582) 1,548,113 1,995,198
Issuance of debentures 115,640 - 3,308,284 -
Issuance of capital stock 68,713 229,798 68,713 449,978
(Increase) Decrease in stock subscription receivable - (96,774) 96,774 (96,774)
Advances (to) from Director 280,642 (102,075) 149,658 (230,678)
--------- --------- ---------- ----------
Net cash provided from financing activities: $ 990,540 16,367 5,171,542 2,117,724
Change in foreign currency
translation adjustment (104,166) (1,274) (105,052) 40,383
Increase (decrease) in cash
and cash equivalents - (21,525) - (11,881)
Cash and cash equivalents,
beginning of period $ - $ 21,525 $ - $ 11,881
--------- --------- ---------- ----------
Cash and cash equivalents,
end of period $ - $ - $ - $ -
========= ========= ========== ==========
Supplemental disclosure of
cash flow information:
Interest paid $ 75,646 - $ 226,403 -
========= ========= ========== ==========
Income taxes paid - - - -
========= ========= ========== ==========
</table>
F-6
Supplemental disclosure of non-cash investing and financing transactions:
For the quarter ended January 31, 2003 the Company sold 500,000 shares of its
common stock, restricted, for gross proceeds of $32,712. The share price was
below the current market value of the shares on the date of issuance based on
the closing price for the Company's common stock. Therefore the Company recorded
a financing charge of $12,288 with a corresponding offset to additional paid in
capital for the difference between the current market value and the gross
proceeds.
Issued 400,000 shares of its common stock, restricted, valued at $36,000, the
market value of the stock on the date the shares were issued. The shares were
issued pursuant to a registration rights agreement and a financing charge had
been recorded by the Company at the time the commitment to issue the shares
arose.
F-7
D'Angelo Brands, Inc.
Notes to Financial Statements
January 31, 2003 (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. ("Ontario")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 6 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.
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 $107,750 and $21,609 for the three months ended January
31, 2003 and 2002, respectively.
Revenue Recognition:
The Company recognizes sales upon shipment of goods to customers.
Impairment of Long-Lived Assets:
In accordance with SFAS No. 121, "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 January 31, 2003 and January 31, 2002.
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 January 31, 2003, the weighted average common shares outstanding would have
been increased by 48,887,670 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 quarter ended January 31,
2002 was materially incorrect. The Company has restated, in the financial
statements, the financial information for the quarter ended January 31, 2002.
The incorrect information for the quarter ended January 31, 2002 will not
require restatement of the financial statements for the entire fiscal year ended
April 30, 2002.
3. Capital Assets
<table>
<caption>
January 2003 April 2002
----------------------------------- ------------
Cost Accumulated Net Carrying Net Carrying
Amortization Amount Amount
----------- ------------ ------------ ------------
<s> <c> <c> <c> <c>
Land 1,097,766 - 1,097,766 956,221
Building 1,726,110 92,311 1,633,799 1,060,780
Manufacturing Equipment 3,265,148 164,390 3,100,758 667,825
Office Equipment 14,204 2,155 12,050 -
Trucks 51,168 45,363 5,804 16,040
------------------------------------------ ------------
6,154,395 304,219 5,850,176 2,700,866
</table>
F-13
<table>
<caption
<s> <c> <c>
4. Mortgages and Other Debt
January 2003 April 2002
------------- -------------
First mortgage on the property located at 14
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. 1,635,590 0
- -----------------------------------------------------------------------------------
Second mortgage on the Property owed to D.
Dunsmuir Investments Canada Limited. The
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. 425,254 414,832
- -----------------------------------------------------------------------------------
Third mortgage on the Property owed to
Reagens Canada Ltd. The mortgage bears
interest at 20% 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. 121,034 1,608,271
- -----------------------------------------------------------------------------------
Mortgage (now repaid but previously was third
mortgage) on the Property owed to D. Dunsmuir
Investments Canada Limited. The mortgage bears
interest at 16% per annum payable monthly. The
principal is due on demand. The mortgage has been
guaranteed by an officer of the Company. 0 74,032
- -----------------------------------------------------------------------------------
Promissory demand note owed to D. Dunsmuir
Investments Canada Limited jointly and severally
withan 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 a first charge on all
equipment and a second charge on inventory and
accounts receivable.
ii)fourth registered charge on the Property
iii)first registered charge on all production
equipment 719,660 702,023
- ----------------------------------------------------------------------------------
Promissory demand note owed to David Stewart
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. 163,559 255,281
- ----------------------------------------------------------------------------------
Demand promissory note advanced from D.
Dunsmuir 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. 327,118 0
- ---------------------------------------------------------------------------------
Demand promissory note advanced from D. Dunsmuir
Investments Canada Limited. 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. 785,083 0
- ---------------------------------------------------------------------------------
Demand loan (the "Loan") advanced from Wasanda
Enterprises Inc. (the "Holder").Interest on the
demand loan is payable monthly on the last day
of each month, at the rate of 10% per annum
from January 31, 2003 to the date of repayment in
full. The Loan is evidenced by a debenture in the
principal amount of $6,542,362. After existing
encumbrances already in place outlined above,
security for the payment of principal and interest
payable under this debenture from the Loan and all
other obligations owed to the Holder is:
a) 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, plants, vehicles,
machinery, equipment and accessories of every
nature of the Company and D'Angelo Brands Ltd.
b) a floating charge in favour of the Holder on
all property and assets of every nature of the
Company and D'Angelo Brands Ltd. 425,254 0
- ------------------------------------------------------------------------------------
Total Mortgages and Other Debt 4,602,552 3,054,439
========= ==========
</table>
F-14
5. Long Term Debt
On September 23, 2002, 1540633 Ontario Inc. issued a debenture with the
principal amount of $3,308,284 ("Principal Amount") at January 31, 2003 to
Wasanda Enterprises Inc. 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) 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) a floating charge in favour of the Holder on all property and
assets of every nature of "Ontario".
F-15
6. Common Stock
Class A Common Stock
For the quarter ended January 31, 2003 the Company had the
following Class A Common Stock transactions:
Sold 500,000 shares of its common stock, restricted, for gross proceeds of
$32,712. The share price was below the current market value of the shares on the
date of issuance based on the closing price for the Company's common stock.
Therefore the Company recorded a financing charge of $12,288 with a
corresponding offset to additional paid in capital for the difference between
the current market value and the gross proceeds.
Issued 400,000 shares of its common stock, restricted, valued at $36,000, the
market value of the stock on the date the shares were issued. The shares were
issued pursuant to a registration rights agreement and a financing charge had
been recorded by the Company at the time the commitment to issue the shares
arose.
Converted, 1,966,726 Exchangeable shares to Class A common shares of the
Company.
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
F-16
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. During the quarter ended January 31, 2003 the
Company converted, 1,966,726 Exchangeable shares to Class A common
shares of the Company.
During the quarter ended January 31, 2003 the Company converted, 1,966,726
Exchangeable shares to Class A common shares of the Company.
7. Significant Customer
For the three months ended January 31, 2003, one customer accounted for
approximately 66% and another customer accounted for approximately 33% of
the Company's sales.
8. 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.
On December 20, 2002, the Company issued a warrant to Wasanda Enterprises Inc.
to acquire, at any time in whole or in part, until December 19, 2007, five
million (5,000,000) common shares from the Company with an exercise price of six
cents ($0.06) per common share.
9. 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 January 31, 2003, $141,422 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
January 31, 2003, the $70,000 has been accrued but no payments had been made.
F-17
10. 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. ("Les
Aliments"). 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. Les Aliments has amended 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. Les Aliments has taken out an order to add the Company as
a defendant to the claim. Discoveries are now partially complete. 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 claims will be
settled without any significant cost to the Company other than legal expenses.
On June 21, 2002, $327,118 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, $785,083 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
-------------------------------
January 31, 2004 $31,208
January 31, 2005 $25,299
January 31, 2006 $11,988
January 31, 2007 $4,995
F-18
11. Income Taxes
The components of the provision for income taxes is as follows:
2003 2002
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.
At January 31, 2003, 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 January 31, 2003 included in its Quarterly Report on Form
10-QSB.
RESULTS OF OPERATIONS
Comparing the three months ended January 31, 2003 to the three months ended
January 31, 2002
Sales. For the three months ended January 31, 2003, sales were $654,962, an
increase of $654,962 over the $0 sales for the three months ended January 31,
2002. 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 ($251,078) for the three months ended January 31,
2003, a decrease of $193,816 compared to gross profit of ($57,262) for the three
months ended January 31, 2002. The decrease in gross profit was primarily
attributable to costs of preparing the new Tiverton Facility for production and
higher ingredient costs due to the limited supply of fruit and juice in the
quarter ended January 31, 2003.
2
Selling, Marketing, Distribution and Warehousing Expenses. Selling, marketing,
distribution and warehousing expenses were $184,555 for the three months ended
January 31, 2003, an increase of $117,907 over selling, marketing, distribution
and warehousing expenses of $66,648 for the three months ended January 31, 2002.
This increase was due primarily to higher salaries and expenses to operate the
warehouse which was not being used in the quarter ended January 31, 2002.
General and Administrative Expenses. General and administrative expenses were
$294,705 for the three months ended January 31, 2003, an increase of $227,349
over general and administrative expenses of $67,356 for the three months ended
January 31, 2002. The increase was due to higher salaries, depreciation and
office expenses.
Financing Expenses. Financing expenses were $12,288 for the three months ended
January 31, 2003, a decrease of $674,164 over financing expenses of $686,452 for
the three months ended January 31, 2002. The expense for both periods was due to
shares sold below market value.
Interest. Interest was $198,241 for the three months ended January 31, 2003, an
increase of $106,760 over interest of $91,481 for the three months ended January
31, 2002. 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 $940,867 for the three months ended January
31, 2003, a decrease of $27,555 over the net loss of $968,422 for the three
months ended January 31, 2002. The decrease in the net loss was a result of
lower financing expenses partially offset by lower gross profit and higher
selling, marketing, distribution, warehousing, general and administrative
expenses and interest.
3
COMPARING THE NINE MONTHS ENDED JANUARY 31, 2003 TO THE NINE MONTHS ENDED
JANUARY 31, 2002
Sales. For the nine months ended January 31, 2003, sales were $2,293,923, an
increase of $1,951,709 over the $342,214 sales for the nine months ended January
31, 2002. The increase in sales resulted from the sale and processing of
beverage products which began to be produced in the Company's manufacturing
facility in April 2002.
Gross Profit. Gross profit was ($434,242) for the nine months ended January
31, 2003, a decrease of $403,872 compared to gross profit of ($30,370) for the
nine months ended January 31, 2002. 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 the start-up period of relatively low
production as well as costs of preparing the Tiverton Facility for production.
Commission Income. Commission Income was $0 for the nine months ended January
31, 2003, a decrease of $29,581 from the $29,581 commission income for the nine
months ended January 31, 2002. The decrease in commission income was a result of
the Company no longer sub- licensing the use of its brand names late in 2001.
Selling, Marketing, Distribution and Warehousing Expenses. Selling, marketing,
distribution and warehousing expenses were $530,595 for the nine months ended
January 31, 2003, an increase of $291,733 over selling, marketing, distribution
and warehousing expenses of $238,862 for the nine months ended January 31, 2002.
This increase was due to higher salaries and expenses to operate the warehouse
which was not being used in the quarter ended January 31, 2003.
4
General and Administrative Expenses. General and administrative expenses were
$881,939 for the nine months ended January 31, 2003, an increase of $566,405
over general and administrative expenses of $315,534 for the nine months ended
January 31, 2002. The increase was due to higher salaries, higher depreciation
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 $814,167 for the nine months ended
January 31, 2003, a decrease of $43,551 over the financing expenses of $857,718
for the nine months ended January 31, 2002. The expense for both periods 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 selling shares at below market value to Penguin Petroleum
Products Inc.
Interest. Interest was $468,267 for the nine months ended January 31, 2003, an
increase of $317,486 over interest of $150,781 for the nine months ended January
31, 2002. 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 $3,129,210 for the nine months ended January 31, 2003, an
increase of $1,565,526 over the net loss of $1,563,684 for the nine months ended
January 31, 2002. The increase in the net loss was a result of lower gross
profit and higher selling, marketing, distribution, warehousing, general and
administrative expenses and interest.
LIQUIDITY AND CAPITAL RESOURCES
As of January 31, 2003, the Company had a working capital deficiency of
$7,935,395 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 and process facility 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 $752,212 for the three months ended
January 31, 2003, an increase of $710,613 from the $41,599 net cash used for
operating activities for the three months ended January 31, 2002. Net cash used
for operating activities was $1,692,978 for the nine months ended January 31,
2003 an increase of $1,550,314 from the $142,664 net cash used for operating
activities for the nine months ended January 31, 2002. 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 January 31,
2003 was $134,162 as compared to $4,981 net cash provided from investing
activities for the three months ended January 31, 2002. Net cash used for
investing activities for the nine months ended January 31, 2003 was $3,373,512
as compared to $2,027,324 net cash used for investing activities for the nine
months ended January 31, 2002. The increase in net cash used for investing
activities as compared to the prior year was primarily a result of the purchase
of the processing facility and equipment located in Tiverton, Ontario.
5
Net cash provided from financing activities for the three months ended January
31, 2003 was $990,540 as compared to the $16,367 net cash provided from
financing activities for the three months ended January 31, 2002. Net cash
provided from financing activities for the nine months ended January 31, 2003
was $5,171,542 as compared to $2,117,724 net cash provided from financing
activities for the nine months ended January 31, 2002. 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 5.
On December 20, 2002, a demand loan of $425,254 was advanced from Wasanda
Enterprises Inc. The loan bears interest at the rate of 10% per annum which is
payable monthly on the last day of each month beginning on January 31, 2003.
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 $8,000,000
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.
6
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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. Les Aliments has amended its statement of defense and counterclaim to
include the same claim as before and, in addition, a declaration that Les
Aliments has the right, title and interest in the D'Angelo trademarks. Les
Aliments has taken out an order to add the Company as a defendant to the claim.
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 the Company other
than legal expenses.
ITEM 2. CHANGES IN SECURITIES
Recent Issuances of Unregistered Securities
With respect to the issuances and transfers made, the registrant relied on
Section 4(2) of the Securities Act of 1933, as amended. No advertising or
general solicitation was employed in offering the shares. The securities were
offered for investment only and not for the purposes of resale or distribution,
and the transfer thereof was appropriately restricted.
On November 13, 2002 the Company issued 1,549,541 shares of its common stock,
restricted, in exchange for 1,549,541 Exchangeable Shares. Exchangeable Shares
are Class B Special Shares of D'Angelo Acquisitions Inc. which are subordinate,
non-voting special shares authorized in an unlimited number, each Exchangeable
Share entitling its owner to one share of the Company's common stock on the
following terms:
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;
On November 14, 2002, the Company issued 357,587 shares of its
common stock, restricted, in exchange for 357,587 Exchangeable shares.
7
On November 22, 2002 the Company issued 500,000 shares of its common stock,
restricted, for consideration of $32,712. The share price was below the current
market value of the shares on the date of issuance based on the closing price
for the Company's common stock. Therefore the Company recorded a financing
charge of $12,288 with a corresponding offset to additional paid in capital for
the difference between the current market value and the gross proceeds.
On November 22, 2002, the Company issued 400,000 shares of its common stock,
restricted, valued at $36,000, the market value of the stock on the date the
shares were issued. The shares were issued pursuant to a registration rights
agreement and a financing charge had been recorded by the Company at the time
the commitment to issue the shares arose.
On December 2, 2002, the Company issued 59,598 shares of its common stock,
restricted, in exchange for 59,598 Exchangeable shares.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Interest payments on mortgage and other debt as of March 14, 2003
are in arrears as follows:
D. Dunsmuir Investments Canada Limited $ 197,200
David Stewart $ 8,700
Wasanda Enterprises Inc. $ 44,572
------------------
$ 250,472
------------------
8
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 quarter ended January
31, 2002 was materially incorrect. The Company has restated the financial
information for the quarter ended January 31, 2002 in this 10-QSB. The incorrect
information included in the reports for the quarter ended 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.
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 Warrant, dated December 19, 2002, from the Company to Wasanda
Enterprises Inc. (Incorporated by reference to exhibit 99.6 to
the Schedule 13D/A filed with the Commission on December 27, 2002)
10.2 Debenture, dated December 19, 2002, issued by the Company and
D'Angelo Brands Ltd. to Wasanda Enterprises Inc. (incorporated
by reference to exhibit 99.7 to the Schedule 13D/A filed with the
Commission on December 27, 2002)
10.3 Priority Agreement, dated December 19, 2002 among Wasanda
Enterprises Inc., D. Dunsmuir Investments Canada Limited, D'Angelo
Brands Ltd., D'Angelo Brands Inc., and Frank D'Angelo, attached.
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.
9
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
Date: March 14, 2003
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.
/s/ Frank D'Angelo
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Frank D'Angelo,
President and Principal Accounting Officer
Date: March 14, 2003
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