Attached files
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE
OF EARLIEST EVENT REPORTED – NOVEMBER 12, 2009
CONO
ITALIANO, INC.
(Exact
name of Registrant as specified in its charter)
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NEVADA
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000-51388
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84-1665042
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(State
or other jurisdiction of
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(Commission
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(IRS
Employer
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incorporation)
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File
Number)
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Identification
Number)
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10
Main Street
Keyport,
NJ 07735
(Address
of principal executive offices)
877-330-2666
(Registrant's
telephone number, including area code)
N/A
(Former
name or former address, if changed since last report)
Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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¨
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Written
communications pursuant to Rule 425 under the Securities
Act
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange
Act
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange
Act
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange
Act
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Item
1.01:
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Entry
into a Material Definitive
Agreement.
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On
November 12, 2009, Cono Italiano, Inc., a Nevada corporation (the “Company”)
entered into share exchange agreements (the “Share Exchange Agreements”) with
the shareholders of Cono Italiano, Inc., a Delaware corporation (“Cono Italiano
(Delaware)”). Pursuant to the terms of the agreements, the form of
which are identical, each of the Cono Italiano (Delaware) shareholders have
exchanged their respective shares of Cono Italiano (Delaware) for shares of
Company restricted common stock. The ratio of the exchange was one
share of Company common stock issued for each one share of Cono Italiano
(Delaware) stock tendered. The Company has agreed to issure
61,286,428 shares of the Company’s common stock to the shareholders of Cono
Italiano (Delaware). As an additional inducement to the shareholders of Cono
Italiano (Delaware) to enter into the Share Exchange Agreements, the Company’s
largest shareholder, Lara Mac Inc., agreed to the cancellation of 242,557 of its
shares of the Company’s common stock. Prior to the share exchange
transactions and the cancellation of Lara Mac’s shares, the Company had 485,116
shares issued and outstanding. Following the issuance of 61,286,428
shares and the cancellation of 242,557 shares, the Company will have 61,528,987
shares issued and outstanding.
Effective
at the closing of the share exchange transactions, Cono Italiano (Delaware) has
become a wholly owned subsidiary of the Company. The Share Exchange
Agreements contained conventional provisions for restricted share transactions,
including customary representations and warranties given by the Cono Italiano
(Delaware) shareholders regarding authority to execute the agreement, valid
ownership and transferable title to their Cono Italiano (Delaware) shares which
are unencumbered, free and clear of third party claims or conflicts, contingent
or otherwise, and that no consent of any party is necessary or required to
effectuate the transfer. In addition, the Cono Italiano (Delaware)
shareholders made representations and warranties which the Company has relied
upon for purposes of assessing and determining the validity of the exemption of
the share exchange transaction from registration under the Securities Act of
1933, as amended, and the rules and regulations promulgated
thereunder. The Cono Italiano (Delaware) shareholders also released
Cono Italiano (Delaware) and the Company from any and all claims in respect of
prior share ownership, including, without limitation, any prior contractual
agreements, warrants, or options pertaining to issuance of shares or
anti-dilution rights. Each of Cono Italiano (Delaware) and the
Company made customary representations and warranties in the agreements
regarding due corporate organization, authorization, validity of share issuances
and other general matters.
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Item
2.01:
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Completion
of Acquisition or Disposition of
Assets.
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As
described in Item 1.01 above, on November 12, 2009, the Company and the
shareholders of Cono Italiano (Delaware) entered into Share Exchange Agreements,
pursuant to which the Company has acquired all of the shares of Cono Italiano
(Delaware) in exchange for 61,286,428 shares of the Company’s common
stock. See Item 1.01 for further detail in such regard, which
disclosures are incorporated herein into this Item 2.01 by reference
thereto.
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Item
3.02:
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Unregistered
Sales of Equity Securities.
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As of
November 12, 2009, the Company has has agreed to issue 61,286,428 shares of
restricted common stock to 40 shareholders pursuant to the Share Exchange
Agreements. No cash compensation was paid or received for the shares
which were exchanged. The consideration received in respect of such
issuances by the Company consisted solely of shares of common stock of Cono
Italiano (Delaware). The exchange offer was made to the shareholders
of the common stock of Cono Italiano (Delaware) pursuant to the exemption from
registration provided by Section 4(2) promulgated under the U.S. Securities Act
of 1933, as amended. See also Item 1.01 above for further details
regarding the unregistered issuance of securities, which disclosures are
incorporated herein into this Item 3.02 by reference thereto.
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Item
4.01:
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Changes
in Registrant’s Certifying
Accountant.
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On
November 12, 2009, the Company dismissed its independent auditor, Paritz and
Company P.A. and appointed EFP Rotenberg LLP, as its independent
auditor.
2
The
decision to change auditors was approved by the Audit Committee of the Company's
Board of Directors.
During
the Company's fiscal years ended January 31, 2009 and January 31, 2008, and the
interim period since January 31, 2009, the opinion of Paritz and Company P.A. on
the Company's financial statements did not contain an adverse opinion or
disclaimer of opinion and was not qualified or modified as to uncertainty, audit
scope or accounting principles, except as follows: the independent auditor's
report of Paritz and Company P.A. dated May 18, 2009 (for the year ended January
31, 2009) contained "going concern" qualifications. These qualifications
questioned the Company’s ability to raise additional funds through either the
sale of equity securities or issuance and stressed the absence of any resulting
adjustments in the financial statements; thus raising substantial doubts
regarding the Company's ability to continue as a going concern. During the
Company's two most recent fiscal years, and through the date of their dismissal,
there were no disagreements with Paritz and Company P.A., whether or not
resolved, on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to Paritz and Company P.A.’s satisfaction, would have caused it to
make reference to the subject matter of the disagreement(s) in connection with
its report.
During
the years ended January 31, 2009 and January 31, 2008, and the interim period
between January 31, 2009 and the appointment of EFP Rotenberg LLP, neither the
Company nor anyone acting on the Company’s behalf consulted with EFP Rotenberg
LLP regarding (i) the application of accounting principles to a specific
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on the Company’s financial statements, or (ii) any matter
that was either the subject of a disagreement as that term is used in
Item 304 (a)(1)(iv) of Regulation S-K and the related instructions to
Item 304 of Regulation S-K or a reportable event as that term is used
in Item 304(a)(1)(v) and the related instructions to Item 304 of
Regulation S-K.
The
Company has provided Paritz and Company P.A. with a copy of this Amendment prior
to its filing with the Securities and Exchange Commission (the "Commission") and
has received a letter addressed to the Commission stating that they agree with
the statements made by the Company in response to this Item 4.01, attached
hereto as Exhibit 16.1.
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Item 5.03:
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Amendments to
Articles of Incorporation or Bylaws; Change in Fiscal
Year.
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On
November 12, 2009, the Board of Directors of the Company approved a change of
its fiscal year end from January 31st to
December 31st. The
Company intends to file a Report on Form 10-Q for the quarter ended September
30, 2009, and thereafter to file additional quarterly reports on Form 10-Q
reflecting the revised fiscal year end. The Board has amended Article XI of the
Company’s By-Laws to reflect the adoption of December 31st as the
new fiscal year end.
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Item
5.06
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Change
in Shell Company Status.
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As a
result of the transaction entered into by and between the Company and the
shareholders of Cono Italiano (Delaware), the Company is no longer a “shell
company” as such term is defined in Rule 405 of the Securities Act and Rule
12b-2 of the Exchange Act. Accordingly, we are providing below the
information herein that would be included in a Form 10.
In this
report, we rely on and refer to information and statistics regarding our
industry that we have obtained from a variety of sources. Some of this
information is publicly available and has not been specifically prepared for us
for use in this report or otherwise. Although we believe that this information
is generally reliable, we cannot guarantee, nor have we independently verified,
the accuracy and completeness of such third party information.
3
FORM 10
DISCLOSURES
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Item
1.
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Business
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Introduction
The
Company was incorporated in the State of Nevada on September 9, 2004 as Arch
Management Services Inc. A change of control of the Company occurred on June 5,
2006 and the Company changed its name from “Arch Management Services Inc.” to
“Tiger Ethanol International Inc.” on November 24, 2006. On February
11, 2008 the Company changed its name to “Tiger Renewable Energy Ltd.” Another
change of control of the Company occurred on June 4, 2009. On August
10, 2009, the Company changed its name to “Cono Italiano, Inc.” and its symbol
changed to CNOZ.
Our
principal business address is 10 Main Street, Keyport, NJ 07735 and our
telephone number is 877-330-2666.
Our
Business
We are a
development stage company. Until January 31, 2009, the Company was a party to a
joint venture named Xinjiang Yajia Distillate Company Limited (the “Venture”) to
produce ethanol in the People’s Republic of China. This ethanol was to be
produced from agricultural products. We aspired to become a significant ethanol
manufacturer serving the needs of China’s rapidly expanding personal and
commercial transportation market segments. Due to a lack of financing
and the recent deterioration of world financial markets, the Company’s board of
directors determined that it was in our best interest to initiate a complete and
total withdrawal from the ethanol business. Since January 31, 2009,
the Company has had no operations. The Company has been seeking new
business opportunities since that time.
On June
4, 2009, an Affiliate Stock Purchase Agreement (the “Stock Purchase Agreement”)
was entered into by and between Gallant Energy International Inc. (“Gallant”),
the owner of 5,000,000 shares of the Company’s common stock (prior to the
Company’s one for sixty reverse stock split) and Lara Mac Inc. (“Lara
Mac”), an entity controlled by Mitchell Brown (who is now the Chief
Executive Officer of the Company and a member of the Company’s Board of
Directors). Pursuant to the Stock Purchase Agreement, Gallant sold
all of its 5,000,000 shares of the Company’s common stock to Lara
Mac. The Gallant transaction with Lara Mac resulted in a change in
control of the largest voting block of the Company effective as of June 4,
2009.
Pursuant
to the Stock Purchase Agreement, the Board appointed five individuals to fill
vacancies on the Board. These new directors commenced their service
on June 19, 2009. In addition, the Board has appointed four new
officers of the Company.
On June
22, 2009, Lara Mac entered into a Management Services Agreement with the Company
(the “Management Services Agreement”). Pursuant to the Management
Services Agreement, Lara Mac would render to the Company consulting and
other advisory services in relation to developing strategic plans for inception
of operations, corporate management, the operations of the Company, strategic
planning, domestic and international marketing and sales, financial advice,
including, without limitation, advisory and consulting services in relation to
the selection and retention of candidates for senior management of the Company
and its subsidiaries, prospective strategic alliance partners, preparing
acquisition growth plans, identifying prospective merger and acquisition
candidates, developing value propositions for the Company and acquisition
candidates, analyzing financial implications of potential transactions, advising
on negotiations regarding terms and conditions of transactions, outlining and
managing due diligence issues and due diligence processes, introductions to
prospective customers, selection of investment bankers or other financial
advisors or consultants, and advice with respect to the capital structure of the
Company, equity participation plans, employee benefit plans and other incentive
arrangements for certain key executives of the Company (collectively, the
“Services”). In exchange for the Services, Lara Mac received
9,553,377 shares of the Company’s common stock (these 9,553,377 shares were
issued prior to the Company’s August 10, 2009 one for sixty reverse stock split,
and accordingly, Lara Mac’s ownership of 14,553,377 shares was reduced to
242,557 shares pursuant to such reverse stock split). The parties to
the Management Services Agreement also agreed that Lara Mac may render other
services beyond the scope of activities which the parties contemplate as part of
the Services, as to which Lara Mac shall be entitled to separate compensation
that shall be negotiated in good faith by the parties on a case-by-case
basis. As an inducement to the shareholders of Cono Italiano
(Delaware) to enter into the exchange described in Item 1.01, above, Lara Mac
agreed to the cancellation of these 242,557 shares of the Company’s common stock
and Termination of the Management Services Agreement.
4
On August
10, 2009, the Company conducted a one for sixty reverse stock
split. As of that date, all of the existing outstanding common stock
of the Company have been consolidated such that existing stockholders will hold
one share of post-split common stock for every sixty shares owned prior to the
reverse stock split. All fractional shares resulting from the reverse stock
split have been rounded up to the next whole share.
The
Company recently indentified Cono Italiano (Delaware) as a business venture that
would be suitable for future operations, and acquired all of the issued and
outstanding shares of Cono Italiano (Delaware) in exchange for shares of the
Company’s common stock. The Company now intends to operate Cono
Italiano (Delaware) as a wholly-owned subsidiary.
Cono
Italiano (Delaware)
In
February 2006 Cono Italiano LLC, a New Jersey limited liability company, entered
into an agreement with Kono Italia S.R. L., an Italian company doing business as
“Pizza Hands.” Kono Italia S.R.L owns the designs, recipes and
technology for the “Pizza Cono,” a food product for quick service restaurants
consisting of a cone shaped pizza dough. Cono Italiano (Delaware), as
the successor to Cono Italiano, LLC, holds a distribution agreement for North
America from Kono Pizza in Italy. This distribution agreement grants
the licensee an exclusive license to exploit this product in the United States,
Canada and Mexico for a twenty-five (25) year term. The product is
patented in the United States and Europe as is the cone production machine which
is proprietary. In 2007 Cono Italiano, LLC introduced the product
into the North American market by building an alliance with Center Plate, a food
service provider to stadiums and arenas throughout North America.
Cono
Italiano (Delaware) was formed through the merger of Cono Italiano LLC, a New
Jersey limited liability company, and Janex International, Inc., a Delaware
corporation, on January 14, 2008. The combined entity changed its
name to “Cono Italiano, Inc.” on that date.
Cono
Italiano is licensed to distribute a food product called the “Pizza
Cono.” This Pizza Cone is designed to be a drip free, spill free
cone-shaped pizza made of a proprietary dough and filled with freshly selected
ingredients. The Company intends that the Pizza Cone will be
distributed through the fast food market (the fast food market is generally
defined as restaurants selling food and drinks for immediate consumption either
on the premises in designated eating areas, or for consumption
elsewhere). The Pizza Cone will be distributed to quick-service
restaurants, takeaways, mobile and street vendors, and leisure
locations. These establishments include typical fast food chains,
supermarkets, convenience stores, entertainment facilities and sports
arenas.
On July
9, 2008, Cono Italiano (Delaware) entered into a distribution and licensing
agreement (the “Distribution Agreement”) with Pino Gelato, Inc., a South
Carolina corporation presently involved in retail sales of Italian gelato and
sales of franchises for the sale of gelato. Under the terms of the
Distribution Agreement, we have granted to Pino Gelato, Inc. the rights in the
United States, Canada and Mexico to sell and distribute our products through
immediate consumption retail channels, such as a restaurant, snack bar, kiosk,
or other similar setting. The initial term of the Distribution
Agreement is for ten (10) years and shall be automatically renewed for
additional ten (10) year terms if neither party is in material breach of the
Distribution Agreement at the expiration date of each ten (10) year
term. The Distribution Agreement includes the right to market Pizza
Cones and establish Pizza Cone and Pino Gelato Cafes. Cono Italiano
(Delaware) has received $100,000 in cash in consideration for such Distribution
Agreement. There have been five retail channels established through
Pino Gelato to date and Cono Italiano (Delaware) products have been sold to
various sub-distributors throughout the country for distribution.
Cono
Italiano (Delaware) has reserved distribution rights regarding the sale of
products on a wholesale basis to grocery stores, convenience stores, and other
similar establishments which do not resell the products to customers in a
restaurant, snack bar, kiosk, or other similar setting. By way of
example, Cono Italiano (Delaware) has retained the rights to sell the products
on a wholesale basis to big box stores, convenience stores, and other chains
that sell “frozen” packaged products.
5
As part
of Cono Italiano (Delaware)’s marketing strategy, Cono Italiano (Delaware) paid
$8,500 in September of 2008 to develop retail packaging and conducted a photo
shoot for the product in October of 2008 at a cost of $1,500.
There
have been five licenses sold to date and there are currently five such cafes in
operation, located in South Carolina, Tennessee, Pittsburgh and
Ohio. These cafes are presently selling the Pizza Cone
product.
Since
March of 2009, Cono Italiano (Delaware)’s marketing and distribution efforts
have also included giving free samples of its product away at the Indianapolis
Speedway, presenting the product to potential distributors at a trade show, and
selling the product at an Italian festival in Indianapolis.
In July
of 2008, the Company’s Chief Executive Officer, Mitchell Brown and Ramona
Fantini of Pino Gelato formed a manufacturing entity, Edesia Emprise, LLC, to
produce and manufacturer the "Cones" in Indianapolis
Indiana. Mitchell Brown transferred his ownership interests in Edesia
Emprise, LLC to his father, Gene Brown, later that month. Taylor's Bakery was
contracted as a third party manufacturer for this project in January of 2009,
and in March of 2009, Dough Bros., Inc., an entity established by Taylor’s
Bakery, entered into an agreement with Edesia Emprise, LLC and Cono Italiano
(Delaware).
In the
first quarter of 2009, a production facility was established in Indianapolis,
Indiana by Taylor’s Bakery with proprietary baking equipment purchased from
Italy. Cono Italiano (Delaware) has been working together with the
TurboChef Brand of ovens to develop cooking settings to bake the Cono Italiano
(Delaware) product in retail distribution settings. Major food
establishments including Subway, Dunkin Donuts, and Quick Chek currently use
TurboChef Brand ovens to cook frozen products in their
establishments. Cono Italiano (Delaware) shipped its initial orders
for products in the second quarter of 2009. Cono Italiano (Delaware)
buys and resells the TurboChef Brand ovens as needed. An alternative
supplier, Amana, makes similar ovens at similar prices which the management of
Cono Italiano (Delaware) believes it can rely upon if there is any disruption in
supply of ovens from TurboChef Brand.
On
October 22, 2009, Dough Bros., Inc., John Allen, Drew Allen, Matt Allen, Edesia
Emprise, LLC, Cono Italiano (Delaware), Mitchell Brown, John Jacobs and Ramona
Fantini entered into an agreement to terminate the relationship between Cono
Italiano (Delaware), Edesia Emprise, LLC and Dough Bros., Inc.
On
November 9, 2009, Cono Italiano (Delaware) entered into a Commitment Letter,
pursuant to which, one of our shareholders, Lara Mac has agreed to provide
financing to Cono Italiano, Inc., with such funds as the Company’s Board of
Directors shall deem to be sufficient to maintain the Company’s ordinary course
of business operations (the “Commitment Amount”). We may draw on the
Commitment Amount in monthly tranches in accordance with our operating
requirements as set forth in our business plan. The available Commitment
Amount will be reduced by the aggregate cash proceeds received by the Company
which are derived from the issuance of any equity securities and Company gross
revenues. Draws on the Commitment Amount will be made on terms of unsecured
notes, with interest set on each note as of the date of the draw at prime rate
plus two percent per annum. The notes will mature and become repayable thirty
calendar days after demand at any time following the earlier of (a) December 31,
2010 or (b) the date upon which we are in receipt of revenues or proceeds from
the sales of equity securities. We will give Lara Mac customary representations
and warranties regarding the good standing of our Company and status of progress
in respect of our Company business plan prior to each draw on the Commitment
Amount, and we will provide certifications and covenants regarding use of
proceeds of each draw, which will be in customary forms reasonably requested by
Lara Mac as determined by reference to similar lenders making similar loans to
similar companies. Lara Mac will not be required to make any loans under the
Commitment Amount to us if we are unable to make the representations,
warranties, certifications or covenants, or if we are in breach of any
previously given representations, warranties, certifications or covenants. If we
breach any of the notes, the default rate will be 15% per annum and Lara Mac may
seek recourse against our company for repayment of all of the
notes.
6
On
November 11, 2009, Cono Italiano (Delaware) and Edesia Emprise, LLC entered into
a Master Manufacturing Agreement. Pursuant to this Master
Manufacturing Agreement, Edesia Emprise, LLC will produce the Company’s Pizza
Cono product. Cono Italiano (Delaware) has agreed to pay Edesia
Emprise, LLC the costs of production plus fifteen percent (15%). This
Master Manufacturing Agreement has a five (5) year term and will automatically
renew unless cancelled by one of the parties pursuant to its
terms. This Master Manufacturing Agreement is exclusive within the
United States. Edesia Emprise, LLC may either produce this product
directly or through a subcontractor. Edesia
Emprise, LLC has advised Cono Italiano (Delaware) that it intends to enter into
its first subcontract agreement shortly.
Distribution
The
Company intends to contact food distributors who sell to the restaurant
community to distribute the product. The Company will seek to develop
relationships with independent commissioned sales representatives throughout the
country to sell and market the product to the retail community and specialty
customers. The Pizza Cone will be targeted at a substantial number of
potential customers, including quick service restaurants, takeaways, mobile and
street vendors, and leisure locations such as typical fast food chains,
supermarkets, convenience stores, entertainment facilities, and sports
arenas. The Company therefore does not anticipate depending on a
single or a few major customers.
Cono
Italiano’s marketing and distribution efforts have also included giving free
samples of its product away at the Indianapolis Speedway, presenting the product
to potential distributors at a trade show, and selling the product at an Italian
festival in Indianapolis.
Competitive
Position
Cono
Italiano is a relatively new company introducing a new product into the market
place for quick service pizza. The market in the United States for
quick service pizza is large, highly fragmented and intensely
competitive. There are no assurances that the product will be
generally accepted.
We intend
to do business under our new business model in highly competitive markets. There
are many competitors, some of which are significantly larger, have access to
much more important resources or capital than us, or have established
reputations among potential customers. We may not be able to compete effectively
against other industry participants.
Raw
Materials
The raw
materials used in production of the Pizza Cones include readily available food
products which are purchased in bulk by third party contract
bakers. All raw materials are supplied by the third party contract
bakers pursuant to proprietary recipes and standards of Cono Italiano and baked
into the product. Cono Italiano pays Edesia Emprise, LLC for the
product following shipping.
Compliance
with Government Regulations
At the
present time, Cono Italiano does not need and has not requested government
approval on any products and services. Edesia Emprise, LLC and the
third party contract bakers of Edesia Emprise, LLC are responsible for operation
of production facilities which make our cones and fillings, and they are subject
to various federal state, and local laws, including various health sanitation,
fire, and safety standards and may be subject to licensing and regulations by a
number of governmental authorities.
Research
and Development
The
Company does note presently engage in spending on research and
development. The Company’s anticipates that it may engage in such
activity in the future.
We have
not yet determined our anticipated spending on research and development
activities for the year ending December 31, 2009.
7
Compliance
with Environmental Laws
The costs
and effects of compliance with federal, state and local environmental laws have
not been material to our business from inception through the date of this
Report.
Intellectual
Property
Our
success and ability to compete are dependent, in part, upon our ability to
establish and adequately protect our intellectual property rights. We
intend to rely on a combination of patent, copyright, trademark and trade secret
laws, as well as confidentiality agreements to establish and protect our
proprietary rights. We expect to license certain proprietary rights
from third parties. We also intend to protect our proprietary rights, in part,
through the terms of license agreements and by confidentiality agreements with
our employees, consultants, customers and others.
Employees
As of the
date hereof, the Company has four (4) officers, Mitchell Brown (our Chief
Executive Officer), Joseph Masselli, (our President and Chief Operating
Officer), Alex J. Kaminski (our Chief Financial Officer and Treasurer) and Steve
Savage (our Secretary).
Where
You Can Find More Information
We do not
currently maintain an internet website.
The
Company is and expects to remain a “reporting company.” We will therefore be
required to continue to file annual, quarterly and other filings with the U.S.
Securities and Exchange Commission (the “SEC”). Members of the public may read
and copy any materials which we file with the SEC at the SEC’s Public Reference
Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Members of the
public may obtain additional information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an
internet site that contains reports, proxy and information statements, as well
as other information regarding issuers that file electronically with the SEC.
This site is located at http://www.sec.gov.
You may
also request a copy of our filings at no cost, by writing or telephoning us
at:
Cono
Italiano, Inc.
10 Main
Street
Keyport,
NJ 07735
Telephone:
877-330-2666
Attn:
Mitchell Brown
Chief
Executive Officer
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Item
1A.
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Risk
Factors
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An
investment in our Company involves a substantial risk of loss. You should
carefully consider the risks described below, before you make any investment
decision regarding our Company. Additional risks and uncertainties, including
those generally affecting the market in which we operate or that we currently
deem immaterial, may also impair our business. If any such risks actually
materialize, our business, financial condition and operating results could be
adversely affected. In such case, the trading price of our common stock could
decline.
The
following risk factors are not exhaustive and the risks discussed herein do not
purport to be inclusive of all possible risks but are intended only as examples
of possible investment risks. To facilitate understanding of the various
business risks applicable to our Company and the strategic alliance companies
through which we intend to operate our business during the foreseeable future,
the risk factors discussed herein address our Company together with the risks
applicable to our operations that we intend to conduct with our strategic
alliance partners.
8
Risks
Related to Our Business
We
are a small company with a limited operating history and limited capital
resources. We may not be able to raise additional capital to grow and
expand our business, which could materially and adversely affect the future of
our business.
We are a
small company with a limited history, limited capital and limited operating
resources. As of June 30, 2009, we had cash and cash equivalents of
approximately $46,500(unaudited). While we believe we will be able to meet our
current needs for cash from revenues, we may need additional capital to conduct
business, grow and expand.
The terms
and condition of any which we may receive financing could have a material
adverse affect on our business, results of operations, liquidity and financial
condition. Any investment in our shares is subject to the significant
risk that we will not be able to adequately capitalize our Company to enable us
to continue to develop and implement our business model. Even if we
are able to raise adequate capital, the cost of such capital may be burdensome
and may materially impair our ability to fully implement our business
plan.
Indebtedness
may burden us with high interest payments and highly restrictive terms which
could adversely affect our business.
Should we
borrow money to implement our business plans, we would be burdened with interest
payments. A significant amount of indebtedness could increase the
possibility that we may be unable to generate sufficient revenues to service the
payments on indebtedness, when due, including principal, interest and other
amounts. Agreements made in connection with any borrowings may
contain significant restrictions and covenants that, among other things, could
limit our ability to make investments, pay dividends or make distributions to
our shareholders, repurchase or redeem indebtedness, grant liens on our assets,
enter into transactions with our affiliates, merge or consolidate with other
entities or transfer all or substantially all of our assets, and restrict the
ability of our subsidiaries to pay dividends or to make other payments to
us.
Our
ability to comply with any restrictions and covenants related to indebtedness in
the future is uncertain and would be affected by the levels of cash flow from
our operations and events or circumstances beyond our control. Our
failure to comply with any of restrictions and covenants under indebtedness
financing could result in a default under those facilities, and could cause all
of our existing indebtedness to be immediately due and payable. If any of our
indebtedness were to be accelerated, we may not be able to repay our
indebtedness or borrow sufficient funds to refinance it. Even if we were able to
obtain new financing, it may not be on commercially reasonable terms or on terms
that are acceptable to us. If any of our indebtedness is in default
for any reason, our business, financial condition and results of operations
could be materially and adversely affected. In addition, complying with any
restrictions and covenants may also cause us to take actions that are not
favorable to our shareholders and may make it more difficult for us to
successfully execute our business plan and compete against companies that are
not subject to such restrictions and covenants.
We
may have to price our products and services at low margins which could adversely
affect our business and any investment in our company.
Even if
we are able to compete with our competitors, we may have to price our products
and services at low gross margins in order to gain market share. Competitive
pricing pressures together with new or improved competing product introductions
by our competitors may adversely affect the average selling price of our
products and services and force us to make downward adjustments. If
we are unable to offset price decreases by increasing our sales volumes or by
adjusting our product offerings, our revenues and gross margins would
decline. To grow our business we generate revenues as soon as
possible and thereafter continue to develop and introduce new products, services
and improvements. If we cannot maintain reasonable gross margins, our financial
position may be harmed, our stock price may decline and we may
fail.
9
We
could have substantial difficulty addressing the challenges of rapid
growth.
If demand
for our products increases rapidly, we will need to either increase our internal
production capacity or implement additional outsourcing. Success in developing
and producing a limited volume of products does not guarantee that we will
experience comparable success in operations conducted on a larger scale.
Modifying our procedures and facilities to adjust to increased demand may delay
delivery of our products. Production efficiencies, yields and product
quality may decline as our Company expands over time. If we are unable to meet
the demand of our customers and deliver products quickly and cost effectively,
customers may turn to our competitors. The costs and risks associated with
implementing new technologies, methods and processes, including the purchase of
new equipment, and any resulting delays, inefficiencies and loss of sales, could
harm our results of operations.
We
expect that our anticipated future growth may strain our management,
administrative, operational and financial infrastructure. Failure of
our ability to reasonably manage anticipated growth could materially and
adversely affect our business.
We
anticipate that significant expansion of our present operations will be required
to capitalize on market opportunities. This expansion is expected to place a
significant strain on our management, operational and financial resources. We
expect to add a substantial number of additional key personnel in the future,
including key managerial employees who will have to be fully integrated into our
operations. In order to manage our growth, we will be required to continue to
implement and improve our operational and financial systems, to expand existing
operations, to attract and retain superior management, and to train, manage and
expand our employee base. We cannot assure you that we will be able to
effectively manage the expansion of our operations, that our systems, procedures
or controls will be adequate to support our operations or that our management
will be able to successfully implement our business plan. If we are unable to
manage growth effectively, our business, financial condition and results of
operations could be materially and adversely affected.
Our
success will depend heavily on our management. If we fail to hire and
retain qualified management and other key personnel, the implementation of our
business plan will be materially and adversely affected.
Our
performance is substantially dependent on the continued services and performance
of our executive officers and other key personnel, and our ability to retain and
motivate our officers and key employees. Our future success also depends on our
ability to identify, attract, hire, train, retain and motivate other highly
skilled technical, managerial and marketing personnel. Competition for qualified
personnel is intense, and we cannot assure you that we will be successful in
attracting and retaining such personnel. The failure to attract and retain our
officers or the necessary technical, managerial and marketing personnel could
have a material adverse effect on our business, prospects, financial condition
and results of operations.
Our
dependence on management creates risks. The loss of our experienced officers and
key employees could materially and adversely affect our ability to
professionally manage our business.
Our plan
for success is dependent, in large part, on the active participation of our
executive officers. The loss of their services would materially and adversely
affect our business and future success. We do not have key-man life
insurance in effect at the present time. Should any of our key
employees die or become incapacitated, we may not be able to replace them in a
timely or cost effective manner which could materially and adversely harm our
business, financial condition and results of operations.
We
may be sued for infringing on the intellectual property rights of
others.
Third
parties may claim that we are infringing on their intellectual property
rights. We may violate the rights of others without our knowledge. If
a litigant establishes that we are infringing its intellectual property rights,
or that our intellectual property rights are invalid, we may be forced to change
our products, services, or manufacturing processes, and such changes may be
expensive or impractical. We may then be forced to seek royalty or license
agreements from such litigant. If we are unable to agree on acceptable terms, we
may be required to discontinue the sale of key products or halt other aspects of
our operations. In addition, we may also be liable for significant financial
damages for a violation of intellectual property rights. Any adverse
result related to violation of third party intellectual property rights could
materially and adversely harm our business, financial condition and results of
operations. Even if intellectual property claims brought against us
are without merit, they may result in litigation which could be costly and time
consuming, and may divert our management and key personnel from operating our
business.
10
We
may be exposed to tax audits, which could be expensive for the Company and time
consuming for management.
Our U.S.
federal and state tax returns may be audited by the U.S. Internal Revenue
Service (the “IRS”). An audit may result in the challenge and disallowance of
deductions claimed by us. Further, an audit could lead to an audit of one or
more of our investors and ultimately result in attempts to adjust investors’ tax
returns with respect to items unrelated to us. We are unable to
guarantee the deductibility of any item that we acquire. We will
claim all deductions for federal and state income tax purposes which we
reasonably believe that we are entitled to claim. In particular, we will elect
to treat as an expense for tax purposes all interest, management fees, taxes and
insurance. The IRS may disallow any of the various elements used in calculating
our expenses, thereby reducing federal income tax benefits of an investment. To
the extent that any challenge or disallowance is raised in connection with a tax
return filed by an individual shareholder, the cost of any audit and/or
litigation resulting there from would be born solely by the affected
shareholder. In the event the IRS should disallow any of our deductions, the
directors, in their sole discretion, will decide whether to contest such
disallowance. No assurance can be given that in the event of such a contest the
deductions would be sustained by the courts. If the disallowance of any
deductions results in an underpayment of tax, investors could also be
responsible for interest on the underpayments.
Securities
compliance may be expensive and time consuming for our management.
Compliance
with the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated there under, including, the Sarbanes-Oxley Act of 2002
and related requirements will be costly and will place a significant burden on
our management. At the present time, the Company has only a limited history of
operating with the internal controls and procedures required of a public
company. We expect to commence documenting, reviewing, and where appropriate,
improving our internal controls and procedures in anticipation of being subject
to Section 404 of the Sarbanes-Oxley Act of 2002, which will require
management assessments of the effectiveness of our internal control over
financial reporting. Management will be required to conduct an annual evaluation
of our internal control over financial reporting and include a management report
on our internal control over financial reporting, along with a report by our
independent registered public accounting firm addressing these assessments. We
cannot assure you that measures we have taken, or future measures we may take,
will enable us to provide accurate and timely financial reports, particularly if
we are unable to hire additional personnel in our accounting and financial
department, or if we lose personnel in this area. Any failure to maintain an
effective system of internal controls, or any other problems with our financial
systems or internal controls, could result in delays or inaccuracies in
reporting financial information or failure to comply with SEC reporting and
other regulatory requirements. Any of these situations could
adversely affect our business and stock price.
Estimates
must be made in connection with the preparation of our financial reports. If
changes must be made to financial reports, we could be adversely
affected.
We follow
accounting principles generally accepted in the United States in preparing our
financial statements. As part of this work, we must make many estimates and
judgments which affect the value of the assets and liabilities, contingent
assets and liabilities, and revenue and expenses reported in our financial
statements. We believe that our estimates and judgments are reasonable and we
make them in accordance with our accounting policies based on information
available at the time. However, actual results could differ from our estimates
and this could require us to record adjustments to expenses or revenues that
could be adversely material to our financial position and results of
operations.
11
A
Significant Percentage of our Common Stock is Owned by a Single Investor, which
may lead to the Company taking actions which conflict with other
shareholders.
Our Chief
Executive Officer, Mr. Mitchell Brown, owns 30,000,000 shares of the Company’s
common stock directly, and has sole voting power and sole power of disposition
over all 6,000,000 shares of the Company’s common owned by Lara Mac
Inc. Thus Mr. Brown controls the voting of approximately 58.5% of our
issued and outstanding shares. This concentration of ownership and control could
discourage a potential acquirer from making a tender offer or otherwise
attempting to obtain control of us, or could otherwise delay or prevent a change
in control transaction or other business combination, which could in turn have
an adverse effect on the market price of our common shares. As long as this
concentration of ownership persists, it is unlikely that any other holder or
group of holders of our common shares will be able to affect the way we are
managed or the direction of our business. The interests of the control group of
shareholders could conflict with the interests of other shareholders. In
addition, we may adopt amendments to our organizational documents and applicable
state law which have anti-takeover provisions that could delay or prevent a
change in control of our company.
We
will indemnify our officers and directors which could cause our capital
resources to be used to defend and settle claims or legal actions against
them.
The
Articles of Incorporation, By-Laws and the Nevada Revised Statutes, as amended
contain provisions that limit the liability of directors for monetary damages
and provide for indemnification of officers and directors under certain
circumstances. Such provisions may discourage shareholders from bringing a
lawsuit against directors for breaches of fiduciary duty, even though such
action, if successful, might otherwise have benefited our shareholders.
According to such provisions, we are responsible for payment of costs of
settlement and damage awards against our officers or directors.
The
Nevada Revised Statutes provides that our directors and officers are generally
not personally liable to us or our shareholders or creditors for monetary
damages for acts and omissions in his or her capacity as an officer or director
unless it is proven that such act or omission constituted a breach of fiduciary
duty as a director or officer and such breach involved intentional misconduct,
fraud or a knowing violation of law.
The
Articles of Incorporation provide that we will indemnify our directors and
officers against all costs, expenses and liabilities, including the amounts of
judgments, amounts paid in compromise settlements and amounts paid for services
of counsel and other related expenses, which may be incurred by or imposed on
him or her in connection with any claim, action, suit, proceeding, investigation
or inquiry hereafter made, instituted or threatened in which he or she may be
involved as a party or otherwise by reason of any past or future action taken or
authorized and approved by him or her or any omission to act as such officer or
director, at the time of the incurring or imposition of such costs, expenses, or
liabilities, except such costs, expenses or liabilities as shall relate to
matters as to which he or she shall in such action, suit or proceeding, be
finally adjudged to be liable by reason of his or her negligence or willful
misconduct toward the corporation or such other corporation in the performance
of his or her duties as such officer or director.
In
addition to the indemnification provided for in its Articles of Incorporation
and By-Laws, we may enter into agreements to indemnify our directors and
officers. Under these agreements, we will be obligated to indemnify our
directors and officers for expenses, attorneys’ fees, judgments, fines and
settlement amounts incurred by any director or officer in any action or
proceeding arising out of the director’s or officer’s services as a director or
officer of us, any of our subsidiaries or any other company or enterprise to
which the person provides services at our request. We believe that these
provisions and agreements are necessary to attract and retain qualified
individuals to serve as directors and officers.
If
our food products become contaminated, we may be subject to product liability
claims, product recalls and increased scrutiny by regulators, any of which could
adversely affect our business.
Food
products like Pizza Cones are vulnerable to contamination leading to
food-related illness. There is a risk that our products could become
contaminated and then ultimately consumed by purchasers. Purchasers
who suffer, or claim to suffer, as a result of consuming our products may sue
us, and such suits could be expensive and time consuming for the Company and its
management. While Cono Italiano believes that it has adequate
insurance to mitigate the potential risk of losses for product liability claims,
such insurance may prove to be insufficient.
12
A
decline in the economy may lead to a decline in demand for our
products.
Should
the U.S. economy experience a further decline, demand for our product may not
grow and may even decrease, and accordingly, our ability to generate revenues
may be impaired.
Increased
costs for the raw materials used to produce the Pizza Cone may reduce our
profits.
The
Company is unable to predict the extent to which the raw materials used to
produce the Pizza Cone may increase in the future. Significant cost
increase may substantially reduce our profits.
A
material disruption at our processing plant could seriously harm our financial
condition and operating results.
In the
event that the processing plant at which our products are made was to be damaged
due to natural disaster or disrupted by labor disputes, the Company could
experience difficulties in finding an alternative production
location. Such difficult and delay could impact the profitability of
the Company.
The
failure of Pino Gelato, Inc. to effectively sell our products could
significantly reduce our sales and profits.
The
Company will be reliant on Pino Gelato, Inc. and its management in the near
future for the sale of its product to retail outlets. Should Pino
Gelato, Inc. fail to accomplish its goals, the Company will not be adversely
impacted.
Risks
Related To Investing In Our Common Shares
You
may have difficulty selling our common shares and may therefore lose all or a
significant portion of your investment.
Our
common shares trades on the OTC Bulletin Board. The stock price may
be volatile. The market price of our common shares may be subject to wide
fluctuations in response to several factors including the
following:
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·
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Our
ability to execute our business plan and significantly grow our
business;
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Our
ability to generate brand loyalty among target consumer segment car
buyers;
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Increased
competition from competitors who offer competing services;
and
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·
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Our
financial condition and results of
operations.
|
As a
result, our shareholders may find it more difficult to obtain accurate
quotations concerning the market value of the stock. Shareholders also may
experience greater difficulties in attempting to sell our common shares than if
they were listed on a self-regulated national stock exchange.
We
may need to raise additional capital. If we are unable to raise additional
capital, our business may fail.
We may
need to raise additional capital to provide cash for our operations. The fact
that we have generated only $16,339 in sales since inception through June 30,
2009 (unaudited) may deter potential investors from providing
financing. Uncertainty regarding our ability to generate revenues may
make it difficult for us to find financing on acceptable terms. If we
are unable to obtain adequate funding, we may not be able to successfully
develop and market our products and our business may fail. To secure
additional financing, we may need to borrow money or sell more
securities. Under the current circumstances, we may be unable to
secure additional financing on favorable terms, if available at
all.
13
We
do not currently intend to pay dividends on our common stock and, consequently,
the ability to achieve a return on your investment in our common stock will
depend on appreciation in the price of our common stock. If our
common stock does not appreciate in value, investors could suffer losses in
their investment in our common stock.
We do not
expect to pay cash dividends on our common stock. Any future dividend payments
are within the absolute discretion of our Board of Directors and will depend on,
among other things, our results of operations, working capital requirements,
capital expenditure requirements, financial condition, contractual restrictions,
business opportunities, anticipated cash needs, provisions of applicable law and
other factors that our Board of Directors may deem relevant. We may not generate
sufficient cash from operations in the future to pay dividends on our common
stock. As a result, the success of your investment in our common
stock will depend on future appreciation in its value. The price of
our common stock may not appreciate in value or even maintain the price at which
you purchased our shares. If our common stock does not appreciate in
value, investors could suffer losses in their investment in our common
stock.
Because
the market for our common shares is limited, investors may not be able to resell
their common shares. Investors should therefore assume that any
investment in our company will be illiquid for the foreseeable
future.
Our
common shares trade on the Over-the-Counter-Bulletin-Board quotation system.
Trading in our shares has historically been subject to very low volumes and wide
disparity in pricing. Investors may not be able to sell or trade their common
shares because of thin volume and volatile pricing with the consequence that
they may have to hold your shares for an indefinite period of time.
There
are legal restrictions on the resale of the common shares offered, including
penny stock regulations under the U.S. Federal Securities Laws. These
restrictions may adversely affect your ability to resell your
stock.
We
anticipate that our common stock will continue to be subject to the penny stock
rules under the Securities Exchange Act of 1934, as amended. These rules
regulate broker/dealer practices for transactions in "penny stocks." Penny
stocks are generally equity securities with a price of less than $5.00. The
penny stock rules require broker/dealers to deliver a standardized risk
disclosure document that provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker/dealer must also
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker/dealer and its salesperson and monthly account
statements showing the market value of each penny stock held in the customer's
account. The bid and offer quotations and the broker/dealer and salesperson
compensation information must be given to the customer orally or in writing
prior to completing the transaction and must be given to the customer in writing
before or with the customer's confirmation. In addition, the penny stock rules
require that prior to a transaction, the broker and/or dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
The transaction costs associated with penny stocks are high, reducing the number
of broker-dealers who may be willing to engage in the trading of our shares.
These additional penny stock disclosure requirements are burdensome and may
reduce all of the trading activity in the market for our common stock. As long
as the common stock is subject to the penny stock rules, our shareholders may
find it more difficult to sell their shares.
Our
future sales of our common shares could cause our stock price to
decline.
There is
no contractual restriction on our ability to issue additional shares. We cannot
predict the effect, if any, that market sales of our common shares or the
availability of shares for sale will have on the market price prevailing from
time to time. Sales by us of our common shares in the public market, or the
perception that our sales may occur, could cause the trading price of our stock
to decrease or to be lower than it might be in the absence of those sales or
perceptions.
You
may experience dilution of your ownership interests due to the future issuance
of additional shares of our common stock which could be materially adverse to
the value of our common stock.
Giving
effect to the shares issued in exchange for the Cono Italiano (Delaware) shares,
we have 61,528,987 shares of our common stock issued and outstanding, following
both our one for sixty reverse stock split on August 10, 2009 and our
acquisition of the shares of Cono Italiano (Delaware) on November 12,
2009. We are authorized to issue up to 100,000,000 shares of common
stock. Our Board of Directors may authorize the issuance of additional common or
preferred shares under applicable state law without shareholder
approval. We may also issue additional shares of our common stock or
other securities that are convertible into or exercisable for common stock in
connection with the hiring of personnel, future acquisitions, future private
placements of our securities for capital raising purposes or for other business
purposes. Future sales of substantial amounts of our common stock, or the
perception that sales could occur, could have a material adverse effect on the
price of our common stock. If we need to raise additional capital to
expand or continue operations, it may be necessary for us to issue additional
equity or convertible debt securities. If we issue equity or
convertible debt securities, the net tangible book value per share may decrease,
the percentage ownership of our current stockholders may be diluted and such
equity securities may have rights, preferences or privileges senior or more
advantageous to our common stockholders.
14
Grants
of stock options and other rights to our employees may dilute your stock
ownership.
We plan
to attract and retain employees in part by offering stock options and other
purchase rights for a significant number of common shares. We have granted stock
options to certain officers and directors. The issuance of common
shares pursuant to these options, and options issued in the future, will have
the effect of reducing the percentage of ownership in us of our then existing
shareholders.
The
market price of our common stock may be volatile which could adversely affect
the value of your investment in our common stock.
The
trading price of our common stock may be highly volatile and could be subject to
wide fluctuations in response to various factors. Some of the factors that may
cause the market price of our common stock to fluctuate include:
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fluctuations
in our quarterly financial results or the quarterly financial results of
companies perceived to be similar to
us;
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Changes
in estimates of our financial results or recommendations by securities
analysts;
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failure
of any of our products to achieve or maintain market
acceptance;
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Changes
in market valuations of similar
companies;
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significant
products, contracts, acquisitions or strategic alliances of our
competitors;
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Success
of competing products or services;
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Changes
in our capital structure, such as future issuances of securities or the
incurrence of additional debt;
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regulatory
developments;
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litigation
involving our company, our general industry or
both;
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additions
or departures of key personnel;
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investors’
general perception of us; and
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Changes
in general economic, industry and market
conditions.
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Absence
of equity research reports or unfavorable reports could adversely affect the
price of our stock.
The
trading market for our common shares will rely in part on the research and
reports that equity research analysts publish about us and the industry segments
in which we operate. The public price of our publicly traded common shares could
decline if one or more securities analysts downgrades investment in our common
shares or if those analysts issue other unfavorable commentary about our
industry or other major participants in our industry, or if they decline to
publish reports about us.
15
|
Item
2.
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Financial
Information
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Selected
Financial Data
Pursuant
to permissive authority under Regulation S-K, Rule 301, we have omitted selected
financial data.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
The
following discussion of the financial condition and results of operations of the
Company should be read in conjunction with the financial statements and the
related notes thereto included elsewhere in this Report. This Report contains
certain forward-looking statements and the Company's future operating results
could differ materially from those discussed herein. Certain statements
contained in this Report, including, without limitation, statements containing
the words "believes", "anticipates," "expects" and the like, constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”). However, as the Company intends to issue “penny
stock,” as such term is defined in Rule 3a51-1 promulgated under the Exchange
Act, the Company is ineligible to rely on these safe harbor provisions. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Given
these uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements. The Company disclaims any obligation to update any
such factors or to announce publicly the results of any revisions of the
forward-looking statements contained or incorporated by reference herein to
reflect future events or developments.
Introduction
The
Company was incorporated in the State of Nevada on September 9, 2004 as Arch
Management Services Inc. A change of control of the Company occurred on June 5,
2006 and the Company changed its name from “Arch Management Services Inc.” to
“Tiger Ethanol International Inc.” on November 24, 2006. On February
11, 2008 the Company changed its name to “Tiger Renewable Energy Ltd.” Another
change of control of the Company occurred on June 4, 2009. On August
10, 2009, the Company changed its name to “Cono Italiano, Inc.” and its symbol
changed to CNOZ.
Our
principal business address is 10 Main Street, Keyport, NJ 07735 and our
telephone number is 877-330-2666.
Our
Business
We are a
development stage company. The Company was previously involved in the
production of ethanol from agricultural products. The Company’s board
of directors determined that it was in our best interest to initiate a complete
and total withdrawal from the ethanol business as of January 31,
2009. The Company subsequently began seeking new business
opportunities.
We
recently indentified Cono Italiano (Delaware) as a business venture that would
be suitable for future operation. On November 12, 2009, we entered
into agreement with the shareholders of Cono Italiano pursuant to which we
acquired all of the issued and outstanding shares of the Cono Italiano
(Delaware) and we will now operate Cono Italiano as a wholly-owned subsidiary of
our Company.
Cono
Italiano (Delaware)
In
February 2006 Cono Italiano LLC, a New Jersey limited liability company, entered
into an agreement with Kono Italia S.R. L., an Italian company doing business as
“Pizza Hands.” Kono Italia S.R.L owns the designs, recipes and
technology for the “Pizza Cono,” a food product for quick service restaurants
consisting of a cone shaped pizza dough. Cono Italiano (Delaware) (as
the successor to Cono Italiano, LLC) holds a distribution agreement for North
America from Kono Pizza in Italy. This distribution agreement grants
the licensee an exclusive license to exploit this product in the United States,
Canada and Mexico for a twenty-five (25) year term. The product is
patented in the United States and Europe as is the cone production machine which
is proprietary. In 2007 Cono Italiano, LLC introduced the product
into the North American market by building an alliance with Center Plate, a food
service provider to stadiums and arenas throughout North
America.
16
Cono
Italiano (Delaware) was formed through the merger of Cono Italiano LLC, a New
Jersey limited liability company, and Janex International, Inc., a Delaware
corporation, in January, 2008. Cono Italiano (Delaware) was formed as
Janex International, Inc. on July 6, 2007 in the State of
Delaware. On January 8, 2008 Janex International Inc. changed
its name to Cono Italiano, Inc. Cono Italiano, LLC (Cono, LLC) was
formed on June 27, 2007 as a limited liability company in the State of New
Jersey. Cono, LLC had no operations and its primary assets were
the license rights to manufacture, market, and distribute “pizza cono”, a unique
pizza style food product. In March 2007, the license rights held by
the individual founders of Cono, LLC was sold to The Total Luxury Group (“TLG”),
an unrelated entity. Subsequently, on January 8, 2008 the license
rights were transferred to Mitchell Brown, our Company’s Chief Executive
Officer, for the total consideration of $312,000. The transfer of
Cono, LLC (which includes the license rights) was effected in settlement of an
obligation due to Mitchell Brown by TLG. On January 14, 2008, Cono,
LLC was sold to Cono Italiano (Delaware) for the total consideration of
$426,000. In exchange for the 100% interest in Cono, LLC, the sole
member of the LLC received 6,000,000 shares of Cono Italiano (Delaware) valued
at $114,700 and was issued a promissory note for $312,000. Mitchell
Brown is also a principal stockholder in the Company.
Cono
Italiano (Delaware) is licensed to distribute a food product called the “Pizza
Cono.” The Pizza Cone is designed to be a drip free, spill free
cone-shaped pizza made of a proprietary dough and filled with freshly selected
ingredients. The Company intends that the Pizza Cone will be
distributed through the fast food market (the fast food market is generally
defined as restaurants selling food and drinks for immediate consumption either
on the premises in designated eating areas, or for consumption
elsewhere). The Pizza Cone will be distributed to quick-service
restaurants, takeaways, mobile and street vendors, and leisure
locations. These establishments include typical fast food chains,
supermarkets, convenience stores, entertainment facilities and sports
arenas.
On July
9, 2008, Cono Italiano (Delaware) entered into a distribution and licensing
agreement (the “Distribution Agreement”) with Pino Gelato, Inc., a South
Carolina corporation presently involved in retail sales of Italian gelato and
sales of franchises for the sale of gelato. Under the terms of the
Distribution Agreement, we have granted to Pino Gelato, Inc. the rights in the
United States, Canada and Mexico to sell and distribute our products through
retail channels. The initial term of the Distribution Agreement is
for ten (10) years and shall be automatically renewed for additional ten (10)
year terms if neither party is in material breach of the Distribution Agreement
at the expiration date of each ten (10) year term. The Distribution
Agreement includes the right to market Pizza Cones and establish Pizza Cone and
Pino Gelato Cafes. Cono Italiano (Delaware) has received $100,000 in
cash in consideration for such Distribution Agreement. There have
been five retail channels established to date for a licensing fee of
$25,000. Product has been sold to various distributors throughout the
country for distribution.
As part
of Cono Italiano (Delaware)’s marketing strategy, Cono Italiano (Delaware) paid
$8,500 in September of 2008 to develop retail packaging and conducted a photo
shoot for the product in October of 2008 at a cost of $1,500.
There
have been five licenses sold to date and there are currently five such cafes in
operation, located in South Carolina, Tennessee, Pittsburgh and
Ohio. These cafes are presently selling the Pizza Cone
product.
In July
of 2008, the Company’s Chief Executive Officer, Mitchell Brown and Ramona
Fantini of Pino Gelato formed a manufacturing entity, Edesia Emprise, LLC, to
produce and manufacturer the "Cones" in Indianapolis
Indiana. Mitchell Brown transferred his ownership interests in Edesia
Emprise, LLC to his father, Gene Brown, later that month. Taylor's Bakery was
contracted as a third party manufacturer for this project in January of 2009,
and in March of 2009, Dough Bros., Inc., an entity established by Taylor’s
Bakery, entered into an agreement with Edesia Emprise, LLC and Cono Italiano
(Delaware).
Since
March of 2009, Cono Italiano (Delaware)’s marketing and distribution efforts
have also included giving free samples of its product away at the Indianapolis
Speedway, presenting the product to potential distributors at a trade show, and
selling the product at an Italian festival in Indianapolis.
17
In the
first quarter of 2009, a production facility was established in Indianapolis,
Indiana by Taylor’s Bakery with proprietary baking equipment purchased from
Italy. Cono Italiano (Delaware) has been working together with the
TurboChef Brand of ovens to develop cooking settings to bake the Cono Italiano
product in retail distribution settings. Major food establishments
including Subway, Dunkin Donuts, and Quick Chek currently use TurboChef Brand
ovens to cook frozen products in their establishments. Cono Italiano
(Delaware) shipped its initial orders for products in the second quarter of
2009. Cono Italiano (Delaware) buys and resells the TurboChef Brand
ovens as needed. An alternative supplier, Amana, makes similar ovens
at similar prices which the management of Cono Italiano (Delaware) believes it
can rely upon if there is any disruption in supply of ovens from TurboChef
Brand.
On
October 22, 2009, Dough Bros., Inc., John Allen, Drew Allen, Matt Allen, Edesia
Emprise, LLC, Cono Italiano (Delaware), Mitchell Brown, John Jacobs and Ramona
Fantini entered into an agreement to terminate the relationship between Cono
Italiano (Delaware), Edesia Emprise, LLC and Dough Bros., Inc.
On
November 11, 2009, Cono Italiano (Delaware) and Edesia Emprise, LLC entered into
a Master Manufacturing Agreement. Pursuant to this Master
Manufacturing Agreement, Edesia Emprise, LLC will produce the Company’s Pizza
Cono product. Cono Italiano (Delaware) has agreed to pay Edesia
Emprise, LLC the costs of production plus fifteen percent (15%). This
Master Manufacturing Agreement has a five (5) year term and will automatically
renew unless cancelled by one of the parties pursuant to its
terms. This Master Manufacturing Agreement is exclusive within the
United States. Edesia Emprise, LLC may either produce this product
directly or through a subcontractor. Edesia
Emprise, LLC has advised Cono Italiano (Delaware) that it intends to enter into
its first subcontract agreement shortly.
Financial
Information in this Report
The
acquisition of Cono Italiano (Delaware) by our Company is for accounting
purposes treated as a reverse acquisition where Cono Italiano (Delaware) is the
accounting survivor. As such, all financial information discussed and
presented herein is the historical and current information pertaining only
to Cono Italiano (Delaware) except as otherwise indicated. The
financial statements and notes included as part of this Report pertain only
to Cono Italiano (Delaware) as the accounting survivor and disregard
the historical financial statements filed by our Company prior to the
acquisition of Cono Italiano (Delaware).
Revenues
In the
six month period ended June 30, 2009, Cono Italiano (Delaware) had total sales
of $5,054.
Financial
Condition, Liquidity and Capital Resources
Through
June 30, 2009, Cono Italiano (Delaware) has accrued total liabilities of
$931,362 in the course of developing its operations. The Company’s
expenditures are expected to increase as the Company expands its operations,
expends additional funds on marketing, administration and new staff, and
commences the payment of salaries to existing officers and directors (although
the Company’s officers and directors have agreed that they will not receive any
salary through December 31, 2010). Total liabilities increased from
$170,569 on December 31, 2007 to $831,838 on December 31, 2008, and then to
$931,362 at June 30, 2009.
The total
assets of Cono Italiano (Delaware) decreased from $285,279 on December 31, 2007
to $240,497 on December 31, 2008, and then increased to $356,856 at June 30,
2009. The Company’s largest asset as of June 30, 2009 was the value
of its licensing rights, net of accumulated amortization, which was assed as
being worth $140,253.
As of
June 30, 2009, Cono Italiano (Delaware) had $46,501 in cash on hand, as compared
to $724 on hand as of December 31, 2008. The main source of this cash
was loans from an officer; our Chief Executive Officer, Mitchell Brown, was owed
$616,650 as of June 30, 2009, which total loan amount had increased from
$568,828 at December 31, 2008.
18
Total
expenses for the six month period ended June 30, 2009 were
$69,364. This included, in part, fees for professional services
totaling $20,493, travel expenses of $16,663, depreciation expense of $7,293, an
interest expense of $6,657, amortization expense of $3,249 and stock for
services expense of $3,269 (this expense represents various services rendered,
including marketing and graphics consulting fees).
The
Company’s management believes that Cono Italiano will need additional capital to
conduct business, grow and expand the Company. The terms and
condition of any which we may receive financing could have a material adverse
affect on our business, results of operations, liquidity and financial
condition.
On
November 9, 2009, Cono Italiano (Delaware) entered into a Commitment Letter,
pursuant to which, one of our shareholders, Lara Mac has agreed to provide
financing to Cono Italiano, Inc., with such funds as the Company’s Board of
Directors shall deem to be sufficient to maintain the Company’s ordinary course
of business operations (the “Commitment Amount”). We may draw on the
Commitment Amount in monthly tranches in accordance with our operating
requirements as set forth in our business plan. The available Commitment
Amount will be reduced by the aggregate cash proceeds received by the Company
which are derived from the issuance of any equity securities and Company gross
revenues. Draws on the Commitment Amount will be made on terms of unsecured
notes, with interest set on each note as of the date of the draw at prime rate
plus two percent per annum. The notes will mature and become repayable thirty
calendar days after demand at any time following the earlier of (a) December 31,
2010 or (b) the date upon which we are in receipt of revenues or proceeds from
the sales of equity securities. We will give Lara Mac customary representations
and warranties regarding the good standing of our Company and status of progress
in respect of our Company business plan prior to each draw on the Commitment
Amount, and we will provide certifications and covenants regarding use of
proceeds of each draw, which will be in customary forms reasonably requested by
Lara Mac as determined by reference to similar lenders making similar loans to
similar companies. Lara Mac will not be required to make any loans under the
Commitment Amount to us if we are unable to make the representations,
warranties, certifications or covenants, or if we are in breach of any
previously given representations, warranties, certifications or covenants. If we
breach any of the notes, the default rate will be 15% per annum and Lara Mac may
seek recourse against our company for repayment of all of the
notes.
The
independent auditor's reports of EFP Rotenberg LLP for the periods ended June
30, 2009 and December 31, 2008 contained "going concern" qualifications, noting
that there was an accumulated deficit of $980,085 at December 31, 2008 and
$1,045,919 at June 30, 2009. Cono Italiano (Delaware)’s auditors
expressed the opinion that such entity’s continued existence is dependent upon
its ability to raise capital. The financial statements do not include
any adjustments that might be necessary should Cono Italiano (Delaware) be
unable to continue as a going concern.
Off
Balance Sheet Arrangements
The
Company does not have any off balance sheet arrangements that have or are
reasonably likely to have a current or future effect on the Company's financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources.
|
Item
3.
|
Properties
|
The
Company does not own any real estate. The Company does not plan on investing in
real estate in the near future. The Company is currently utilizing office space
located in Keyport , New Jersey. The Company does not currently pay
rent. The Company’s Chief Executive Officer has been paying the rent, phone and
utilities for the prior years for Cono Italiano. On November 9, 2009,
Cono Italiano (Delaware) entered into a Commitment Letter, pursuant to which one
of our shareholders, Lara Mac has agreed to provide financing to Cono Italiano,
Inc., with such funds as the Company’s Board of Directors shall deem to be
sufficient to maintain the Company’s ordinary course of business
operations. These funds will be used to pay the costs of maintaining
the Company’s offices. The Company’s corporate offices are located in
New Jersey. All production facilities related to the Company’s
business are owned or rented by third party contractors to the
Company.
19
|
Item 4.
|
Security
Ownership of Certain Beneficial Owners and
Management
|
Security
Ownership of Certain Beneficial Owners and Management
The
following table sets forth, as of the close of business on November 12, 2009,
the total number of shares owned beneficially by the Company’s directors,
officers and key employees, and any person (including any group) who is known to
the Company to be the beneficial owner of more than five percent of any class of
the Company's voting securities. Except as otherwise indicated below,
each person named has sole voting and investment power with respect to the
shares indicated. The percentage of ownership set forth below reflects each
holder's ownership interest in the 61,528,987 shares of the Company's common
stock deemed to be outstanding as of November 12, 2009. The
number of shares set forth below reflect both our August 10, 2009 one for sixty
stock split, and our share exchange which was entered into as of November 12,
2009.
Amount and Nature
of
Beneficial
Ownership
|
Name and Address of Beneficial Owner
|
Shares
|
Options/
Warrants (1)
|
Total (1)
|
Percentage of
Shares
Outstanding (1)
|
||||||||||||
|
Five
Percent Stockholders
|
||||||||||||||||
|
Mitchell
Brown (2)
|
36,000,000 | 0 | 36,000,000 | 58.5 | % | |||||||||||
|
Joseph
H. Masselli (3)
|
15,000,000 | 0 | 15,000,000 | 24.4 | % | |||||||||||
|
Executive
Officers and Directors
|
||||||||||||||||
|
Mitchell
Brown, Chief Executive Officer and Director (2)
|
36,000,000 | 0 | 36,000,000 | 58.5 | % | |||||||||||
|
Joseph
Masselli, President, Chief Operating Officer and Director
|
15,000,000 | 0 | 15,000,000 | 24.4 | % | |||||||||||
|
Alex
J. Kaminski, Chief Financial Officer, Treasurer and
Director
|
0 | 0 | 0 | 0 | % | |||||||||||
|
Steve
Savage, Secretary and Director
|
750,000 | 0 | 750,000 | 1.2 | % | |||||||||||
|
Scott
Smith, Director
|
0 | 0 | 0 | 0 | % | |||||||||||
|
All
officers and directors as group (5 persons)
|
51,750,000 | 0 | 51,750,000 | 84.1 | % | |||||||||||
* Less
than 1%.
The
mailing address for each of the officers and directors is Cono Italiano, Inc.,
10 Main Street, Keyport, NJ 07735.
(1)
Includes options and warrants exercisable as of the date hereof or within
60 days hereafter. The Company is unaware of any pledges of any shares, options
or warrants by any of the individuals or entities listed above. The
Company intends to make option grants to certain officers and directors within
the foreseeable future, however, no options or agreements pertaining to options
have been granted or entered into by the Company or such officers and directors
as of the date hereof.
(2) Our
Chief Executive Officer Mr. Mitchell Brown has sole voting power and sole power
of disposition over all 6,000,000 shares of Company common owned by Lara Mac
Inc. (in addition to 30,000,000 shares owned by Mr. Brown directly), and as such
all such shares are therefore deemed to be beneficially owned by Mr.
Brown.
Potential
Changes in Control
To the
knowledge of management, there are no present arrangements or pledges of
securities of the Company which may result in a change in control of the
Company.
20
Changes
in Control
On June
4, 2009, an Affiliate Stock Purchase Agreement (the “Stock Purchase Agreement”)
was entered into by and between Gallant Energy International Inc. (“Gallant”),
the owner of 5,000,000 shares of the Company’s common stock and Lara Mac Inc.
(“Lara Mac”), an entity controlled by Mitchell Brown (who is now the Chief
Executive Officer of the Company and a member of the Company’s Board of
Directors). Pursuant to the Stock Purchase Agreement, Gallant sold
all of its 5,000,000 shares of the Company’s common stock to Lara
Mac.
The
Gallant transaction with Lara Mac resulted in a change in control of the largest
voting block of the Company effective as of June 4, 2009. The
compensation which Gallant received from Lara Mac consisted of Lara Mac’s
agreement to assure the payment of certain obligations of the Company in the
amount of $162,139 which shall be paid by the Company in due
course. The Company is not a party to the Stock Purchase
Agreement. The address of Lara Mac is 10 Main Street, Keyport, NJ
07735.
In
addition, on June 22, 2009, the Company and Lara Mac entered into a Management
Services Agreement. In exchange for the provision of services as set
forth therein, Lara Mac received 9,553,377 shares of the Company’s common stock.
On
November 6, 2009, as additional inducement to the shareholders of Cono Italiano
(Delaware) to enter into the Share Exchange Agreements, Lara Mac Inc. agreed to
the termination of the Management Services Agreement with Cono Italian (Nevada)
and cancellation of all Cono Italian (Nevada) shares previously issued to Lara
Mac under the Management Services Agreement (242,557 shares of the Company’s
common stock as adjusted for the one-for-sixty reverse stock
split).
After
giving effect to the Share Exchange, Mitchell Brown, both as an individual
and through his control of Lara Mac, controls 36,000,000 shares of the Company’s
common stock. These shares will constitute 58.5% of the Company’s
61,528,987 issued and outstanding shares.
In
connection with the change in control, the Company’s Board of Directors intends
to explore new business operations and has chosen “Cono Italiano, Inc.” as a new
name to reflect such operations.
Adverse
Interests
The
Company is not aware of any material proceeding to which any director, officer,
or affiliate of the Company, or any owner of record or beneficially of more than
five percent of any class of the Company’s voting securities, or security holder
is a party adverse to the Company or has a material interest adverse to the
Company.
|
Item 5.
|
Directors
and Executive Officers
|
Directors,
Executive Officers, Promoters and Control Persons
The
following table presents information with respect to our officers, directors and
significant employees as of November 12, 2009:
|
Name
|
Age
|
Position
|
||
|
Mitchell
Brown
|
44
|
Chief
Executive Officer and Director
|
||
|
Joseph
Masselli
|
44
|
President,
Chief Operating Officer and Director
|
||
|
Alex
J. Kaminski
|
43
|
Chief
Financial Officer, Treasurer and Director
|
||
|
Steve
Savage
|
51
|
Secretary
and Director
|
||
|
Scott
Smith
|
41
|
Director
|
Each of
our directors serves until his or her successor is elected and qualified. Each
of our officers is elected by the board of directors to a term of one (1) year
and serves until his or her successor is duly elected and qualified, or until he
or she is removed from office.
21
Biographical
Information Regarding Officers and Directors
Mitchell
Brown, Chief Executive Officer and Director
Mr. Brown
was appointed Chief Executive Officer on June 4, 2009 and commenced serving as a
director on June 19, 2009. From 2004 through 2007, Mr. Brown served
as the President of Discount Direct, a marketing company which served various
cell phone providers. From 2007 through the date hereof, Mr. Brown
has served as the Chairman and Chief Executive Officer of Cono Italiano, Inc., a
company which has acquired the North American rights to sell certain food
products.
Joseph
Masselli, President, Chief Operating Officer and Director
Mr.
Masselli was appointed President and Chief Operating Officer on June 4, 2009 and
commenced serving as a director on June 19, 2009. From 2004 through
2008, Mr. Masselli, 44, was the Owner-General Managing Partner of a
restaurant/club. Since 2008, Mr. Masselli has been employed by Cono
Italiano, Inc., where he leads the Marketing and Public Relations
efforts to establish Cono Italiano’s brand.
Alex
J. Kaminski, Chief Financial Officer, Treasurer and Director
Mr.
Kaminski was appointed Treasurer of the Company on June 4, 2009. He
commenced serving as Chief Financial Officer on June 22, 2009 and Director on
June 19, 2009. Mr. Kaminski, 43, is a Certified Public
Accountant. Since 1989, he has had his own practice. From
2002 to 2008 he served as the Chief Financial Officer and President of Basik
Funding Inc. Since 2005, he has also served as the President of
Homestead Funding Group Inc.
Steve
Savage, Secretary and Director
Mr.
Savage commenced serving as Secretary and Director on June 19,
2009. For the past 5 years Mr. Savage has served as President and
owner of Ocean Consultants Inc. a Real Estate Investment company. The
purpose of the business was to locate, purchase, remodel and market various
residential properties.
Scott
Smith, Director
Mr. Smith
commenced serving as a director on June 19, 2009. Since 1997, Mr.
Smith, 41, has served as the owner and manufacturer’s representative for S.J.
Smith Distributors Inc. Since 2002, Mr. Smith has served as the
Corporate Sales Manager for Ray Catena Motor Car in Edison, NJ.
Family
Relationships
None of
the Company’s officers or directors have any family relationships with the
Company’s other officers or directors or persons nominated or chosen by the
Company to become officers or directors.
Involvement
in Certain Legal Proceedings
During
the past five years no director, person nominated to become a director,
executive officer, promoter or control person of the Company has: (i) had any
bankruptcy petition filed by or against any business of which such person was a
general partner or executive officer either at the time of the bankruptcy or
within two years prior to that time; (ii) been convicted in a criminal
proceeding or been subject to a pending criminal proceeding (excluding traffic
violations and other minor offenses); (iii) been subject to any order, judgment,
or decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of business,
securities or banking activities; or (iv) been found by a court of competent
jurisdiction (in a civil action), the Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended, or
vacated.
22
|
Item 6.
|
Executive
Compensation
|
Executive
Compensation
The
following table sets forth compensation for each of the past three fiscal years
with respect to each person who served as Chief Executive Officer of the Company
and each of the four most highly-compensated executive officers of the Company
who earned a total annual salary and bonuses that exceeded $100,000 in any of
the three preceding fiscal years.
Summary
Compensation Table
|
Name and Principal
Position
|
Year (1)(2)
|
Salary ($)
|
Stock Awards ($)
|
Total
|
|||||||||
|
James Pak Chiu
Leung former CEO, former President and former Director (3) (4)
(5)
|
2009
|
70,000 | 0 | 70,000 | |||||||||
|
2008
|
131,000 | 0 | 131,000 | ||||||||||
|
Robert
G. Clarke, former CEO(6)
|
2009
|
0 | 0 | 0 | |||||||||
|
Michel
St-Pierre, former CFO (7)
|
2009
|
116,694 | 0 | 116,694 | |||||||||
|
2008
|
109,359 | 0 | 109,359 | ||||||||||
|
Mitchell
Brown, Chief Executive Officer and Director (8)
|
2008
|
0 | 280,000 | 280,000 | |||||||||
|
2007
|
0 | 0 | 0 | ||||||||||
|
Joseph
Masselli, President, Chief Operating Officer and Director
(8)
|
2008
|
0 | 40,000 | 40,000 | |||||||||
|
2007
|
0 | 0 | 0 | ||||||||||
|
Alex
J. Kaminski, Chief Financial Officer, Treasurer and Director
(8)
|
2008
|
0 | 0 | 0 | |||||||||
|
2007
|
|||||||||||||
|
Steve
Savage, Secretary and Director (8)
|
2008
|
0 | 20,000 | 20,000 | |||||||||
|
2007
|
0 | 0 | 0 | ||||||||||
|
(1)
|
No
officers earned over $100,000 in any of the three preceding fiscal years,
other than as set forth above.
|
|
|
(2)
|
The
Company’s fiscal year previously ended on January 31st.
The Company changed its fiscal year-end from November 30, 2006 to January
31, 2007, and on November 12, 2009 the Company changed its fiscal year end
to December 31st. The 2009 and 2008 fiscal years for Mr. Leung,
Mr. Clarke and Mr. St-Pierre refer to the fiscal years ended January 31,
2009 and January 31, 2008.
|
|
|
(3)
|
Mr.
Leung served as the Company’s Chief Executive Officer, President and
Director from June 5, 2006 until September 9,
2008.
|
|
|
(4)
|
|
Mr.
Leung was granted stock options to purchase 70,000 shares. The Company
valued these options using the Black-Scholes option -pricing valuation
model. The model uses market sourced inputs such as interest rates, stock
prices, and option volatilities, the selection of which requires Company
management’s judgment, and which may impact the value of the options. The
assumptions used in the Black-Scholes valuation model were: a risk-free
interest rate of 4.6% and 4.7%; the current stock price at date of
issuance of $0.03 and $2.00 per share; the exercise price of the options
of $0.05 and $2.00 per share; the term of 5 years; volatility of 157% and
160%.
|
23
|
(5)
|
The
stock options granted to Mr. Leung have vested as follows: 60,000 were
granted on October 5, 2006 and vested immediately, 5,000 were granted
on November 6, 2006, and vested on that date, and 5,000 were granted on
November 6, 2006 and vested on November 6, 2007.
|
|
|
(6)
|
Mr.
Clarke was appointed as the Company’s President and CEO on September 12,
2008; he resigned from these positions on June 4, 2009.
|
|
|
(7)
|
Mr.
St-Pierre served as the Chief Financial Officer of the Company from
January 9, 2007 until June 22, 2009.
|
|
|
(8)
|
|
To
date, each of Mitchell Brown, Joseph Masselli, Alex J. Kaminski and Steve
Savage have not been paid cash compensation by either the Company or Cono
Italiano
(Delaware).
|
None of
the officers earned any bonus, restricted stock awards, LTIP Payouts or any
other annual or long term compensation other than the stock awards paid to each
of Mr. Brown, Mr. Masselli and Mr. Savage by Cono Italiano
(Delaware).
Outstanding
Equity Awards at Fiscal Year-End (1)
The
following table provides the information regarding outstanding options owned by
the named executive officers and directors as of the end of our prior fiscal
year on January 31, 2009. We have never granted any stock
appreciation rights. Mitchell Brown, our Chief Executive Officer and
Director, Joseph Masselli, our President, Chief Operating Officer and Director,
Alex J. Kaminski, our Chief Financial Officer, Treasurer and Director and Steve
Savage, our Secretary and Director have not been issued any options in the
Company to date. The shares set forth below do not reflect our August
10, 2009 one for sixty stock split.
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
Option Exercise
Price
|
|
Option Expiration Date
|
||
|
James
Pak Chiu Leung, Former CEO, Former President and Former Director
(2)
|
5,000
|
0
|
2.00
|
November
6, 2012
|
||||||
|
5,000
|
0
|
2.00
|
November
6, 2011
|
|||||||
|
Claude
Pellerin, Former Secretary and Former Director (3)
|
5,000
|
0
|
2.00
|
November
6, 2012
|
||||||
|
5,000
|
0
|
2.00
|
November
6, 2011
|
|||||||
(1) The
Company’s fiscal year ended January 31st. On
November 12, 2009, the Company changed its fiscal year end to December 31st.
(2) Mr.
Leung served as the Chief Executive Officer, President and Director of the
Company from June 5, 2006 to September 9, 2008.
(3) Mr.
Pellerin resigned as the Company’s secretary on June 19, 2009.
Director
Compensation
The
persons who served as members of our board of directors, including executive
officers, did not receive any compensation for services as a director in the
fiscal year ended January 31, 2009.
The
Company does not currently have an employment or other compensation agreement
with any of the directors; all directors were compensated according to the
schedule above.
The
Company’s directors will not be separately compensated if they are serving as
officers of the Company. Mr. Scott Smith who will be serving only as
a director and not as an officer will be paid a fee of $18,000 per annum which
will be deferred for the first year of service to the Company.
24
Employment
Contracts
As of the
end of our prior fiscal year on January 31, 2009 the Company did not have any
employment contracts with any officer, director or other
employees. The Company expects to negotiate and enter into employment
agreements with each of the officers serving the Company. The
employment agreements currently under negotiation with the officers are expected
to have the following material provisions: (i) two-year terms with automatic
renewal provisions unless notice is given by either party 30 days prior to
renewal; (ii) grant of 100,000 options at exercise price of fair market value
and exercisable after one year vesting period for term of 6 years with
provisions for cashless exercise; (iii) 20 days’ paid vacation each year;
(iv) termination only for “cause”; (v) commitment of a substantial portion of
their professional time to the Company; and (vi) and additional customary
employment agreement terms and conditions. The officers have agreed
that they will not receive any compensation for their services to the Company
prior to December 31, 2010. The compensation of the officers is
expected to be set as follows:
|
Officer
|
Annual
Salary
|
|||
|
Mitchell
Brown, Chief Executive Officer
|
$
|
125,000
|
||
|
Joseph
Masselli, President and Chief Operating Officer
|
$
|
75,000
|
||
|
Alex
Kaminski, Chief Financial Officer and Treasurer
|
$
|
50,000
|
||
|
Steve
Savage, Secretary
|
$
|
50,000
|
||
Equity
Incentive Plan
On
October 5, 2006, the Company’s Board of Directors adopted the Company’s 2006
Equity Incentive Plan, which authorizes the Company to issue options for the
purchase of up to 2,000,000 shares of the Company’s common stock, pursuant to
the terms and conditions set forth therein. The Equity Incentive Plan authorizes
the issuance of incentive stock options (ISO) and non-qualified stock options
(NQOs) to our employees, directors or consultants.
During
the year ended November 30, 2006, the Company issued 517,500 stock options to
officers and directors of the Company with an average exercise price of $0.30
per share. Of the stock options issued, 450,000 were vested on October 5, 2006,
33,750 were vested on November 1, 2006 and the balance vested on November 1,
2007. Following the resignation of one of our directors in January
2007, 70,000 such options were cancelled. During the month of August, 2007, the
Company issued 50,000 stock options to officers and directors of the Company
with an average exercise price of $2.86 per share. Of the stock options issued,
50,000 vested on August 1, 2007. No options were exercised during the
year ended January 31, 2009. As of the end of our most recent fiscal
year on January 31, 2009 we had three directors and officers eligible to receive
options under the Equity Incentive Plan. Options to buy 277,500
shares of common stock were outstanding under the Equity Incentive Plan and
1,722,500 shares remained available for grants under this plan.
2006
Equity Plan Administration
The
compensation committee is empowered to select those eligible persons to whom
options shall be granted under the 2006 Equity Incentive Plan; to determine the
time or times at which each option shall be granted, whether options will be
ISOs or NQOs and the number of shares to be subject to each option; and to fix
the time and manner in which each option may be exercised, including the
exercise price and option period, and other terms and conditions of options, all
subject to the terms and conditions of the 2006 Equity Incentive
Plan. The compensation committee has sole discretion to interpret and
administer the Plan, and its decisions regarding the Plan are
final.
2006
Equity Plan Option Pricing
Each
grant shall specify an option price per share, which shall be equal to or
greater than the fair market value per share on the grant date; provided that in
the case of any incentive stock option granted to a person who on any given date
owns, either directly or indirectly (taking into account the attribution rules
contained in Section 424(d) of the Code), stock possessing more than 10 percent
of the total combined voting power of all classes of stock of the Company or any
subsidiary, the option price shall not be less than 110% of the fair market
value of a share on the date of grant.
25
2006
Equity Plan Amendment and Termination
The Plan
may be amended from time to time by the Board, but no such amendment shall
increase any of the limitations concerning the shares or options available under
the Plan, other than to reflect an adjustment made in accordance with Section 14
of the Plan (i.e. dilution, enlargement of the rights of participants in the
Plan), change the class of persons eligible to receive grants of awards or the
types of awards available under the Plan and increase the benefits to
participants under the Plan, in any such case without the further approval of
the stockholders of the Company. The Board will also condition any
amendment on the approval of the stockholders of the Company if such approval is
necessary with respect to the applicable listing or other requirements of a
national securities exchange or other applicable laws, policies or regulations,
and the Board may condition any amendment on the approval of the stockholders of
the Company if such approval is deemed advisable to comply with such
requirements.
The Plan
shall terminate on the tenth anniversary of the date upon which it is approved
by the stockholders of the Company, and no award shall be granted after that
date.
The
Company expects to adopt a new equity plan during the foreseeable future which
will be similar to the 2006 Plan.
Indemnification
Agreements
Through
its Indemnification Agreements, the Company agrees to indemnify directors and
officers, to the extend provided for in the Agreement, and to hold them harmless
from and against, any losses or expenses at any time incurred by or assessed
against them arising out of or in connection with their work as a director,
advisory director, Board Committee member, officer, employee or agent of the
Company or of an affiliate, whether the basis of such proceeding is alleged
action in an official capacity or in any other capacity while serving as an
officer or director of the Company or of an Affiliate, to the fullest extent
permitted by law in as in effect or as such laws may from time to time hereafter
be amended to increase the scope of such permitted indemnification.
Whistleblower
Procedures Policy
In
accordance with the requirements of Section 301 of the Sarbanes-Oxley Act of
2002, the Audit Committee of the Board of Directors the Company has adopted this
Whistleblower Procedures Policy, stating that all employees of the Company and
its subsidiaries are strongly encouraged to report any evidence of financial
irregularities which they may become aware of, including those with respect to
internal controls, accounting or auditing matters. Under this
Whistleblower Procedures Policy, the management of the Company shall promptly
and periodically communicate to all employees with access to accounting, payroll
and financial information the means by which they may report any such
irregularities. In the event an employee is uncomfortable for any
reason reporting irregularities to his or her supervisor or other management of
the Company, employees may report directly to any member of the Audit Committee
of the Company. The identity of any employee reporting under these
procedures will be maintained as confidential at the request of the employee, or
may be made on an anonymous basis. Notice must be provided to all of
the Company’s employees with access to accounting, payroll and financial
information in respect of these procedures.
Changes
in Control
As of the
date of filing of this Report, the Company is unaware of any arrangement which
may result in a change in control.
26
|
Item
7.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
Transactions
with Related Persons
Lara
Mac Inc. Management Services Agreement
On June
22, 2009, Lara Mac Inc., an entity controlled by Mitchell Brown, our Chief
Executive Officer and a member of our Board of Directors, entered into a
Management Services Agreement with the Company (the “Management Services
Agreement”). Pursuant to the Management Services Agreement, Lara
Mac would render to the Company consulting and other advisory services in
relation to developing strategic plans for inception of operations, corporate
management, the operations of the Company, strategic planning, domestic and
international marketing and sales, financial advice, including, without
limitation, advisory and consulting services in relation to the selection and
retention of candidates for senior management of the Company and its
subsidiaries, prospective strategic alliance partners, preparing acquisition
growth plans, identifying prospective merger and acquisition candidates,
developing value propositions for the Company and acquisition candidates,
analyzing financial implications of potential transactions, advising on
negotiations regarding terms and conditions of transactions, outlining and
managing due diligence issues and due diligence processes, introductions to
prospective customers, selection of investment bankers or other financial
advisors or consultants, and advice with respect to the capital structure of the
Company, equity participation plans, employee benefit plans and other incentive
arrangements for certain key executives of the Company (collectively, the
“Services”). In exchange for the Services, Lara Mac shall receive
9,553,377 shares of the Company’s common stock (the “Fee”). The value
of the restricted shares of common stock constituting the Fee is deemed to be
$0.044 per share, which is equivalent to fifty percent of the average closing
trading price of the Company’s common stock during the ninety day period of
February 27, 2009, through May 27, 2009. Such time period is deemed
to constitute an objective public capital market valuation of the Company’s
stock price, having an aggregate value of $410,666 (the “Issue
Value”). The parties to the Management Services Agreement also agreed
that Lara Mac may render other services beyond the scope of activities which the
parties contemplate as part of the Services, as to which Lara Mac shall be
entitled to separate compensation that shall be negotiated in good faith by the
parties on a case-by-case basis. In the event that the Company is not
generating organic revenues (excluding interest and investment income) as of the
first anniversary of the date of the Management Services Agreement, then all of
the Shares constituting the Fee shall be subject to repurchase in the entirety
by the Company at a repurchase price equal to the Issue Value. On
November 6, 2009, as additional inducement to the shareholders of Cono Italiano
(Delaware) to enter into the Share Exchange Agreements, Lara Mac Inc. agreed to
the termination of the Management Services Agreement with Cono Italian (Nevada)
and cancellation of all Cono Italian (Nevada) shares previously issued to Lara
Mac under the Management Services Agreement (242,557 shares of the Company’s
common stock as adjusted for the one-for-sixty reverse stock
split).
There
have been no transactions, since the beginning of the Company’s last fiscal
year, and there are no currently proposed transactions, in which the Company was
or is to be a participant and the amount involved exceeds the lesser of $120,000
or one percent of the average of the Company’s total assets at fiscal year-end
for the last three completed fiscal years, and in which any related person had
or will have a direct or indirect material interest, except as set forth
above.
Mr. Scott
Smith, who is the only current member of the Board of Directors who is
independent under the standards for independence contained in the Nasdaq
Marketplaces Rules, Rule 4350(d) and Rule 4200(a)(15), has independently
reviewed and assessed the fairness of the Management Services
Agreement. Mr. Smith has determined that the terms and conditions of
the Management Services Agreement are fair and reasonable to the Company and its
shareholders and he has recommended that the Management Services Agreement be
adopted and approved by the entire Board of Directors. Mr. Mitchell
Brown, having an economic interest in the Management Services Agreement through
his beneficial ownership of Lara Mac, recused himself from all deliberations and
voting in regard to the Management Services Agreement.
Edesia
Emprise, LLC
In July
of 2008, the Company’s Chief Executive Officer, Mitchell Brown and Ramona
Fantini of Pino Gelato formed a manufacturing entity, Edesia Emprise, LLC, to
produce and manufacturer the "Cones" used in the Company’s products at a
location in Indianapolis Indiana. Mitchell Brown transferred his
ownership interests in Edesia Emprise, LLC to his father, Gene Brown, later that
month.
27
On
November 11, 2009, Cono Italiano (Delaware) and Edesia Emprise, LLC entered into
a Master Manufacturing Agreement. Pursuant to this Master
Manufacturing Agreement, Edesia Emprise, LLC will produce the Company’s Pizza
Cono product. Cono Italiano (Delaware) has agreed to pay Edesia
Emprise, LLC the costs of production plus fifteen percent (15%). This
Master Manufacturing Agreement has a five (5) year term and will automatically
renew unless cancelled by one of the parties pursuant to its
terms. This Master Manufacturing Agreement is exclusive within the
United States.
On
November 12, 2009, the Company’s Board of Directors ratified the Master
Manufacturing Agreement entered into by and between Cono Italiano (Delaware) and
Edesia Emprise, LLC. The Board has determined that the terms and
conditions of this agreement are fair and reasonable to the Company and its
shareholders. Mr. Mitchell Brown, whose father owns Edesia Emprise,
LLC, recused himself from all deliberations and voting in regard to this
agreement.
Director
Independence
Mr. Scott
Smith is the only current member of the Board who may be deemed to be
independent. The Company has adopted the standards for independence
contained in the Nasdaq Marketplaces Rules, Rule 4350(d) and Rule
4200(a)(15).
|
Item
8.
|
Legal
Proceedings
|
As of the
date of this Report the Company is not a party to any legal
proceeding.
|
Item
9.
|
Market
Price of Registrant’s Common Equity and Related Shareholder
Matters
|
(a)
Market Information.
The
Company's common equity is traded on the over-the-counter bulletin board under
the symbol CNOZ.OB. The aforementioned price of the common shares is an
inter-dealer price, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions. Our stock is also traded in Germany
on (i) the Frankfurt Stock Exchange (under the symbol XES.F); (ii) the Stuttgart
Stock Exchange (under the symbol XES.SG); (iii) the Berlin Stock Exchange (under
the symbol XES.BE); and (iv) Xetra (under the symbol XES.DE).
The
following table sets forth for the periods indicated the high and low bid prices
for the Common Shares in U.S. Dollars. These quotations reflect only inter
dealer prices, without retail mark up, mark down or commissions and may not
represent actual transactions.
Subsequent
to the periods covered by this chart, the Company changed its fiscal year end
from January 31st to
December 31st.
|
Common
Stock
|
||||||||
|
Quarter
ended
|
High
|
Low
|
||||||
|
January
31, 2008
|
2.75 | 1.40 | ||||||
|
April
30, 2008
|
2.49 | 0.84 | ||||||
|
July
31, 2008
|
1.28 | 0.22 | ||||||
|
October
31, 2008
|
0.53 | 0.09 | ||||||
|
January
31, 2009
|
0.19 | 0.03 | ||||||
|
April
30, 2009
|
0.19 | 0.03 | ||||||
|
July
31, 2009
|
0.12 | 0.06 | ||||||
|
October
31, 2009
|
6.60 | (1) | 0.07 | |||||
(1) This
price occurred subsequent to the Company’s one for sixty stock
split. The prices in this table have not been
adjusted.
28
(b)
Holders.
As of
November 12, 2009, the Company had 59 shareholders of record.
(c)
Dividends.
The
Company has never declared or paid cash dividends. We do not currently intend to
pay cash dividends on our common stock in the foreseeable future. Indeed, we
anticipate retaining any earning for use in the continued development of the
Company.
Securities
authorized for issuance under equity compensation plans
The
following chart sets forth equity compensation plan securities issuances and
availability as of January 31, 2009.
|
Number of securities to be issued
upon exercise of outstanding
options, warrants and rights
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column (a)
|
||||||||||
|
(a)
|
(b)
|
(c)
|
||||||||||
|
Equity
compensation plans approved by security holders
|
n/a | n/a | n/a | |||||||||
|
Equity
compensation plans not approved by security holders
|
2,000,000 | 0.96 | 1,722,500 | |||||||||
|
Total
|
2,000,000 | 0.96 | 1,722,500 | |||||||||
On
October 5, 2006, the Company’s Board of Directors adopted an Equity Incentive
Plan, and authorized the Company to issue options for the purchase of up to
2,000,000 shares of the Company’s common stock, pursuant to the terms and
conditions set forth therein.
|
Item
10.
|
Recent
Sales of Unregistered
Securities
|
Sales
by the Company
On
September 1, 2006, the Company and Gallant Energy International Inc. (“Gallant”)
entered into a Purchase Agreement pursuant to which Gallant sold the Company its
interest in a joint venture it formed with certain Chinese entities to develop
facilities for the production of ethanol fuel in the People’s Republic of China,
in exchange for the issuance of 5,000,000 shares of the Company’s common stock
for a value of $143,000.
On
November 1, 2006, VP Bank (Schweiz) AG paid five hundred and fifty thousand
dollars ($550,000) to purchase from the Company (i) 275,000 shares of the
Company's common stock; and (ii) Series A Warrants to purchase up to an
additional 137,500 shares of the Company's common stock at an exercise price
initially set at $2.50 per share. The relative fair value of the common stock
was $436,000 and the relative fair value of the warrants was
$114,000.
On
November 1, 2006, Sal. Oppenheim Jr. & Cie (Schweiz) AG paid four hundred
and fifty thousand dollars ($450,000) to purchase from the Company (i) 225,000
shares of the Company's common stock; and (ii) Series A Warrants to purchase up
to an additional 112,500 shares of the Company's common stock at an exercise
price initially set at $2.50 per share. The relative fair value of the common
stock was $356,000 and the relative fair value of the warrants was
$94,000.
On
November 1, 2006, Portu Finance paid five hundred thousand dollars ($500,000) to
purchase from the Company (i) 250,000 shares of the Company's common stock; and
(ii) Series A Warrants to purchase up to an additional 125,000 shares of the
Company's common stock at an exercise price initially set at $2.50 per share.
The relative fair value of the common stock was $396,000 and the relative fair
value of the warrants was $104,000.
29
On March
8, 2007, Emper Overseas S.A paid five hundred thousand dollars ($500,000) to
purchase from the Company (i) 250,000 shares of the Company's common stock; and
(ii) Series A Warrants to purchase up to an additional 125,000 shares of the
Company's common stock at an exercise price initially set at $2.50 per share.
The relative fair value of the common stock was $360,000 and the relative fair
value of the warrants was $140,000.
On March
8, 2007, Aton Select Fund Limited paid five hundred thousand dollars ($500,000)
to purchase from the Company (i) 250,000 shares of the Company's common stock;
and (ii) Series A Warrants to purchase up to an additional 125,000 shares of the
Company's common stock at an exercise price initially set at $2.50 per share.
The relative fair value of the common stock was $360,000 and the relative fair
value of the warrants was $140,000.
On March
10, 2007, Simeon Securities S.A. paid five hundred thousand dollars ($500,000)
to purchase from the Company (i) 250,000 shares of the Company's common stock;
and (ii) Series A Warrants to purchase up to an additional 125,000 shares of the
Company's common stock at an exercise price initially set at $2.50 per share.
The relative fair value of the common stock was $359,000 and the relative fair
value of the warrants was $141,000.
On March
16, 2007, Capinvest LLC paid one million and five thousand dollars ($1,500,000)
to purchase from the Company (i) 750,000 shares of the Company's common stock;
and (ii) Series A Warrants to purchase up to an additional 375,000 shares of the
Company's common stock at an exercise price initially set at $2.50 per share.
The relative fair value of the common stock was $1,079,000 and the relative fair
value of the warrants was $421,000.
On March
30, 2007, the Company (i) issued 1,250,000 shares of the Company’s common stock;
and (ii) issued Series A Warrants to purchase up to an additional 625,000 shares
of the Company’s common stock. The total purchase price paid for the common
stock and Series A Warrants pursuant to the Common Stock Purchase Agreements was
$2,500,000.
On July
27, 2007, Adagio Marine Ltd paid one million and five thousand dollars
($1,500,000) to purchase from the Company (i) 750,000 shares of the Company's
common stock; and (ii) Series A Warrants to purchase up to an additional 375,000
shares of the Company's common stock at an exercise price initially set at $2.50
per share. The relative fair value of the common stock was $1,082,000 and the
relative fair value of the warrants wais $418,000.
On June
25, 2008, the Company issued seven hundred seventy one thousand and seventy
(771,070) shares of common stock to DT Crystal Holdings Limited. These shares
were issued pursuant to an Exchange Agreement entered into between the Company
and DT Crystal Holdings Limited as of June 19, 2008. The Company owed $462,642
to DT Crystal Holdings Limited as of June 19, 2008, consisting of loans in the
amount $450,000, plus accrued interest totalling $12,642. The Company and DT
Crystal Holdings Limited elected to convert this debt into 771,070 shares of the
Company’s common stock. The conversion price of these shares of the Company’s
common stock, $.60 per share, was equal to the average of the selling price of
the Company’s common stock traded during the Fifteen (15) business days prior to
the closing date of this transaction, minus an adjustment of 7.5%
On August
12, 2008, Pellerin lawyers exchanged $38,905 of accounts payables for 155,621
shares of the Company’s common stock. The conversion price of these
shares of the Company’s common stock was $.25 per share, which resulted in a
cost of $17,118 for the Company.
All of
the aforementioned stock issuance transactions were made with non-U.S. persons
and were undertaken by the Company in reliance upon the exemption from
securities registration of Regulation S of the U.S. Securities Act of 1933, as
amended, (the “Securities Act”) and the rules and regulations promulgated
thereunder.
On June
22, 2009, Lara Mac entered into a Management Services Agreement with the Company
(the “Management Services Agreement”). Pursuant to the Management Services
Agreement, Lara Mac would render management consulting and other advisory
services to the Company (collectively, the “Services”). In exchange
for the Services, Lara Mac received 9,553,377 shares of the Company’s restricted
common stock (these 9,553,377 shares were issued prior to the Company’s August
10, 2009 one-for-sixty reverse stock split, and accordingly, Lara Mac’s
ownership of 14,553,377 shares was reduced to 242,557 shares pursuant to the
reverse stock split). The shares were issued under exemption from
registration in reliance on Section 4(2) of the Securities Act. As an
inducement to the shareholders of Cono Italiano (Delaware) to enter into the
exchange described in Item 1.01 above, Lara Mac agreed to the cancellation of
these 242,557 shares of the Company’s common stock and termination of the
Management Services Agreement.
On
November 12, 2009, the Company entered into share exchange agreements (the
“Share Exchange Agreements”) with the shareholders of Cono Italiano
(Delaware). Pursuant to the terms of the agreements, the form of
which are identical, each of the Cono Italiano (Delaware) shareholders have
exchanged their respective shares of Cono Italiano (Delaware) for shares of
Company restricted common stock (such proposed exchange, the “Exchange
Offer”). The ratio of the exchange was one share of Company common
stock issued for each one share of Cono Italiano (Delaware) stock
tendered. The Company agreed to issued 61,286,428 shares of
the Company’s common stock to 40 shareholders of Cono Italiano (Delaware).
Effective at the closing of the share exchange transactions, Cono Italiano
(Delaware) has become a wholly owned subsidiary of the Company. No
cash compensation was paid or received for the shares which were
exchanged. The consideration received in respect of such issuances by
the Company consisted solely of shares of common stock of Cono Italiano
(Delaware). The Exchange Offer was made to the shareholders of the
common stock of Cono Italiano pursuant to the exemption from registration
provided by Section 4(2) promulgated under the U.S. Securities Act of 1933, as
amended.
30
|
Item
11.
|
Description
of Registrant’s Securities
|
Authorized
Capital Stock
Our
authorized capital stock consists of 100,000,000 shares of common stock, par
value $0.00001 per share. The holders of our common stock:
|
·
|
have
equal ratable rights to dividends from funds legally available if and when
declared by our board of directors;
|
|
·
|
are
entitled to share ratably in all of our assets available for distribution
to holders of common stock upon liquidation, dissolution or winding up of
our affairs;
|
|
·
|
do
not have preemptive, subscription or conversion rights and there are no
redemption or sinking fund provisions
or rights; and
|
|
|
·
|
are
entitled to one non-cumulative vote per share on all matters on which
shareholders may vote.
|
All
shares of common stock now outstanding are fully paid for and non-assessable. We
refer you to our Articles of Incorporation, Bylaws and the applicable statutes
of the State of Nevada for a more complete description of the rights and
liabilities of holders of our securities.
Non-Cumulative
Voting
Holders
of shares of our common stock do not have cumulative voting rights, which means
that the holders of more than 50% of the outstanding shares, voting for the
election of directors, can elect all of the directors to be elected, if they so
choose, and, in that event, the holders of the remaining shares will not be able
to elect any of our directors.
Cash
Dividends
As of the
date of this Report, we have not paid any cash dividends to shareholders. The
declaration of any future cash dividend will be at the discretion of our board
of directors and will depend upon our earnings, if any, our capital requirements
and financial position, our general economic conditions, and other pertinent
conditions. It is our present intention not to pay any cash dividends in the
foreseeable future, but rather to reinvest earnings, if any, in our business
operations.
Anti-takeover
provisions
There are
no Nevada anti-takeover provisions that may have the affect of delaying or
preventing a change in control.
Periodic
Securities & Exchange Commission Reports
We are
required to file reports with the SEC under section 15(d) of the Securities Act.
The reports will be filed electronically. The reports we file are Forms 10-K,
10-Q, and 8-K. You may read copies of any materials we file with the SEC at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that
will contain copies of the reports we file electronically. The address for the
Internet site is www.sec.gov.
Stock
Transfer Agent
Our stock
transfer agent for our securities is Olympia Trust Company, 120 Adelaide Street
West, Suite 920, Toronto, Ontario, M5H 1T1, telephone: (416)
364-8081.
31
|
Item
12.
|
Indemnification
of Directors and Officers.
|
As
permitted by Section 78.7502 of the Nevada Revised Statutes, Article VIII of the
Company’s Bylaws indemnifies any officer, director or control person of the
Company from liability, thereby making the Company responsible for any expenses
or damages incurred by such officer, director or control person in any action
brought against them based on their conduct in such capacity, provided they did
not engage in fraud or criminal activity.
We expect
that each member of the Company’s board of directors and each officer of the
Company (each such individual, an “Indemnitee”) will enter into an
indemnification agreement (the “Indemnification Agreement”) with the Company,
pursuant to which the Company will indemnify Indemnitee for, and hold Indemnitee
harmless from and against, any Losses or Expenses (as such terms are defined in
the Indemnification Agreement) at any time incurred by or assessed against
Indemnitee arising out of or in connection with the service of Indemnitee as a
director, advisory director, Board Committee member, officer, employee or agent
of the Company or an Affiliate, whether the basis of such proceeding is alleged
action in an official capacity or in any other capacity while serving as an
Officer or Director of the Company or of an Affiliate, to the fullest extent
permitted by law.
|
Item
13.
|
Financial
Statements and Supplementary
Data
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of
Cono
Italiano, Inc.
We have
audited the accompanying balance sheets of Cono Italiano, Inc. as of December
31, 2008, and 2007, and the related statements of operations, change in
stockholders’ equity (deficit), and cash flows for the years then ended. Cono
Italiano, Inc.’s management is responsible for these financial statements. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Cono Italiano, Inc. as of December
31, 2008 and 2007, and the results of its operations and its cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note H to the financial
statements, the Company’s significant operating losses raise substantial doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
/s/ EFP
Rotenberg, LLP
EFP
Rotenberg, LLP
Rochester,
New York
November
11, 2009
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
|
FINANCIAL
REPORTS
|
|
AT
|
|
DECEMBER
31, 2008
|
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
TABLE
OF CONTENTS
|
Balance
Sheets at December 31, 2008 and 2007
|
2
|
|||
|
Statements
of Changes in Stockholders’ Equity (Deficit) for the Years Ended December
31, 2008 and 2007
|
3
|
|||
|
Statements
of Operations for the Years Ended December 31, 2008 and
2007
|
4
|
|||
|
Statements
of Cash Flows for the Years Ended December 31, 2008 and
2007
|
5
|
|||
|
Notes
to Financial Statements
|
6 -
15
|
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
|
BALANCE
SHEETS
|
||||||||
|
December
31,
|
2008
|
2007
|
||||||
|
ASSETS
|
||||||||
|
Cash
and Cash Equivalents
|
$ | 724 | $ | 100,517 | ||||
|
Due
from Related Party
|
55,500 | — | ||||||
|
Prepaid
Expenses
|
4,615 | — | ||||||
|
Total
Current Assets
|
60,839 | 100,517 | ||||||
|
Property
and Equipment - Net of Accumulated Depreciation
|
36,156 | 34,762 | ||||||
|
Other
Assets
|
||||||||
|
Licensing
Rights - Net of Accumulated Amortization
|
143,502 | 150,000 | ||||||
|
Total
Assets
|
$ | 240,497 | $ | 285,279 | ||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||
|
Liabilities
|
||||||||
|
Accrued
Interest
|
$ | 17,885 | $ | 5,967 | ||||
|
Deferred
Revenue
|
45,125 | — | ||||||
|
Notes
Payable
|
200,000 | — | ||||||
|
Due
to Officer
|
568,828 | 164,602 | ||||||
|
Total
Liabilities
|
831,838 | 170,569 | ||||||
|
Stockholders'
Equity (Deficit)
|
||||||||
|
Common
Stock - $.0001 Par; 150,000,000 and 500,000,000 Shares Authorized,
53,250,000 and 6,000,000 Shares Issued and Outstanding
|
5,325 | 600 | ||||||
|
Additional
Paid-In-Capital
|
383,419 | 164,400 | ||||||
|
Deficit
|
(980,085 | ) | (50,290 | ) | ||||
|
Total
Stockholders' Equity (Deficit)
|
(591,341 | ) | 114,710 | |||||
|
Total
Liabilities and Stockholders' Equity (Deficit)
|
$ | 240,497 | $ | 285,279 | ||||
The
accompanying notes are an integral part of these financial
statements.
- 2
-
(FORMERLY
KNOWN AS JANEX INTERNATIONAL INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
STATEMENTS OF CHANGES IN
EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
|
Common Stock
|
Additional
|
Total
|
||||||||||||||||||
|
$ .0001 Par
|
Paid-In
|
Stockholder's
|
||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity (Deficit)
|
||||||||||||||||
|
Balance
- January 1, 2007
|
6,000,000 | $ | 600 | $ | 164,400 | $ | — | $ | 165,000 | |||||||||||
|
Net
Loss
|
— | — | — | (50,290 | ) | (50,290 | ) | |||||||||||||
|
Balance
- December 31, 2007
|
6,000,000 | 600 | 164,400 | (50,290 | ) | 114,710 | ||||||||||||||
|
Additional
Paid-In-Capital - Deemed Distribution
|
— | — | (312,000 | ) | — | (312,000 | ) | |||||||||||||
|
Common
Stock Issued to Prior Owners
|
3,000,000 | 300 | 56,700 | 57,000 | ||||||||||||||||
|
Common
Stock Issued in Exchange for Services
|
44,250,000 | 4,425 | 474,319 | — | 478,744 | |||||||||||||||
|
Net
Loss
|
— | — | — | (929,795 | ) | (929,795 | ) | |||||||||||||
|
Balance
- December 31, 2008
|
53,250,000 | $ | 5,325 | $ | 383,419 | $ | (980,085 | ) | $ | (591,341 | ) | |||||||||
The
accompanying notes are an integral part of these financial
statements.
- 3
-
(FORMERLY
KNOWN AS JANEX INTERNATIONAL INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
|
STATEMENTS
OF OPERATIONS
|
||||||||
|
For
the Years Ended December 31,
|
2008
|
2007
|
||||||
|
Sales
|
$ | 11,285 | $ | — | ||||
|
Cost
of Sales
|
5,668 | — | ||||||
|
Gross
Profit
|
5,617 | — | ||||||
|
Expenses
|
||||||||
|
Selling
and Direct
|
121,631 | — | ||||||
|
Compensation
Expense
|
280,000 | — | ||||||
|
General
and Administrative
|
521,863 | 44,323 | ||||||
|
Interest
Expense
|
11,918 | 5,967 | ||||||
|
Total
Expenses
|
935,412 | 50,290 | ||||||
|
Net
Loss
|
$ | (929,795 | ) | $ | (50,290 | ) | ||
|
Loss
per Share - Basic and Diluted
|
$ | (0.02 | ) | $ | (0.01 | ) | ||
|
Weighted
Average Common Shares Outstanding
|
40,687,123 | 6,000,000 | ||||||
The
accompanying notes are an integral part of these financial
statements.
- 4
-
(FORMERLY
KNOWN AS JANEX INTERNATIONAL INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
|
STATEMENTS
OF CASH FLOWS
|
||||||||
|
For
the Years Ended December 31,
|
2008
|
2007
|
||||||
|
Cash
Flows from Operating Activities
|
||||||||
|
Net
Loss
|
$ | (929,795 | ) | $ | (50,290 | ) | ||
|
Adjustments
to Reconcile Net Loss to
|
||||||||
|
Net
Cash Flows from Operating Activities:
|
||||||||
|
Amortization
|
6,498 | — | ||||||
|
Depreciation
|
13,980 | 1,040 | ||||||
|
Interest
on Officer Loan
|
11,918 | 5,967 | ||||||
|
Common
Stock Issued in Exchange for Services
|
478,744 | — | ||||||
|
Expense
to Prior Owners
|
257,000 | |||||||
|
Changes
in Assets and Liabilities:
|
||||||||
|
Prepaid
Expenses
|
(4,615 | ) | — | |||||
|
Deferred
Revenue
|
45,125 | — | ||||||
|
Net
Cash Flows from Operating Activities
|
(121,145 | ) | (43,283 | ) | ||||
|
Net
Cash Flows from Investing Activities
|
||||||||
|
Purchase
of Property and Equipment
|
(15,374 | ) | (20,802 | ) | ||||
|
Cash
Flows from Financing Activities
|
||||||||
|
Cash
Advance to Related Party
|
(55,500 | ) | — | |||||
|
Due
to Officer
|
92,226 | 164,602 | ||||||
|
Net
Cash Flows from Financing Activities
|
36,726 | 164,602 | ||||||
|
Net
Change in Cash and Cash Equivalents
|
(99,793 | ) | 100,517 | |||||
|
Cash
and Cash Equivalents - Beginning of Year
|
100,517 | — | ||||||
|
Cash
and Cash Equivalents - End of Year
|
$ | 724 | $ | 100,517 | ||||
|
Supplemental
Non-Cash Investing and Financing Activities:
|
||||||||
|
Deemed
Distribution
|
$ | 312,000 | $ | — | ||||
|
Cash
Paid During the Year for:
|
||||||||
|
Interest
|
$ | — | $ | — | ||||
|
Income
Taxes
|
$ | — | $ | — | ||||
The
accompanying notes are an integral part of these financial
statements.
- 5
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
A -
|
The
Company
|
|
|
Merger
and Recapitalization
|
|
Cono Italiano, Inc.,
(Cono, Inc. or the “Company”) was formed as Janex International
Inc. on July 6, 2007 in the State of
Delaware. On January 8, 2008 Janex International Inc.
changed its name to Cono Italiano,
Inc.
|
|
|
Cono
Italiano, LLC (Cono, LLC) was formed on June 27, 2007 as a limited
liability company in the State of New Jersey. Cono, LLC had no
operations and its primary assets were the license rights to manufacture,
market, and distribute “pizza cono”, a unique pizza style food
product.
|
|
|
In
March 2007, the license rights held by the individual founders of Cono,
LLC was sold to The Total Luxury Group (TLG), an unrelated
entity. Subsequently, on January 8, 2008 the license rights
were transferred to Mitchell Brown for the total consideration of
$312,000. The transfer of Cono, LLC (which includes the license
rights) was effected in settlement of an obligation due to Mitchell Brown
by TLG.
|
|
|
On
January 14, 2008, Cono, LLC was sold to Cono, Inc. for the total
consideration of $426,000. In exchange for the 100% interest in
Cono, LLC, the sole member of the LLC received 6,000,000 shares of Cono,
Inc. valued at $114,000 and was issued a promissory note for
$312,000. Mitchell Brown is also a principal stockholder in
Cono, Inc.
|
|
|
The
transaction was accounted for as a recapitalization of Cono, Inc. and
Cono, LLC both companies under common control. As such, the
assets and liabilities of Cono, LLC were carried over to Cono, Inc. at the
historical carrying values.
|
|
|
At
the time of the sale of Cono, LLC to Cono, Inc., Cono had a tangible net
book value of $114,700. Since the assets and liabilities of
Cono, LLC were recorded at their historical carrying amounts after the
merger and recapitalization, the excess of the consideration paid of
$426,000 over the carrying value of $114,700 had been recorded as a
distribution to the stockholder.
|
|
Note
B -
|
Summary
of Significant Accounting Policies
|
|
|
Method
of Accounting
|
|
|
The
Company maintains its books and prepares its financial statements on the
accrual basis of accounting.
|
|
|
Cash
and Cash Equivalents
|
|
|
Cash
and cash equivalents include time deposits, certificates of deposit, and
all highly liquid debt instruments with original maturities of three
months or less. The Company maintains cash and cash equivalents
at financial institutions, which periodically may exceed federally insured
amounts.
|
-
continued -
- 6
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
B -
|
Summary
of Significant Accounting Policies -
continued
|
|
|
Property,
Equipment and Depreciation
|
|
|
Property
and equipment are reflected at cost of acquisition and are depreciated on
various methods utilizing the following estimated
lives:
|
|
Machinery
and Equipment
|
5 -
7 Years
|
|
|
Office
Equipment
|
|
3 -
7 Years
|
|
|
Maintenance
and repairs are expensed as incurred. The cost of property and
equipment retired or otherwise disposed of and the related accumulated
depreciation are removed from the accounts and reflected as other income
or expense.
|
|
|
Long-lived
Assets
|
|
|
The
Company accounts for impaired long-lived assets in accordance with
Statement of Financial Accounting Standards No. 144 (“SFAS 144”),
“Accounting for the Impairment or Disposal of Long-Lived
Assets”. This standard prescribes the method for asset
impairment evaluation for long-lived assets and certain identifiable
intangibles that are either held and used or are to be disposed
of. The Company evaluates the ability to recover long-lived
assets whenever events or circumstances indicate that the carrying value
of the asset may not be recoverable. In the event assets are
impaired, losses are recognized to the extent the carrying value exceeds
the fair value. In addition, the Company reports assets to be
disposed of at the lower of the carrying amount or the fair market value
less selling costs.
|
|
|
Intangible
Assets
|
|
|
Intangible
assets consist of licensing rights. The Company applies an
impairment evaluation whenever events or changes in business circumstances
indicate that the carrying value of the intangible assets may not be
recoverable. Other intangible assets are amortized on a
straight-line basis over their estimated economic lives. The
Company believes that the straight-line method of amortization reflects an
appropriate allocation of the cost of the intangible assets to earnings in
proportion to the amount of economic benefits obtained annually by the
Company.
|
|
|
Income
Taxes
|
|
|
The
Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, “Accounting for Income Taxes”,
using the asset and liability approach, which requires recognition of
deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying amounts and the
tax basis of such assets and liabilities. This method utilizes
enacted statutory tax rates in effect for the year in which the temporary
differences are expected to reverse and gives immediate effect to changes
in income tax rates upon enactment. Deferred tax assets are
recognized, net of any valuation allowance, for temporary differences and
net operating loss and tax credit carry forwards. Deferred
income tax expense represents the change in net deferred assets and
liability balances.
|
|
|
-
continued -
|
- 7
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
B-
|
Summary
of Significant Accounting Policies -
continued
|
|
|
Earnings
per Share
|
|
|
Earnings per share
of common stock are computed in accordance with SFAS No, 128, “Earnings
per Share”. Basic earnings per share are computed by
dividing income or loss available to common shareholders by the
weighted-average number of common shares outstanding for each
period. Diluted earnings per share are calculated by adjusting
the weighted average number of shares outstanding assuming conversion of
all potentially dilutive stock options, warrants and convertible
securities, if dilutive. Common stock equivalents that are anti-dilutive
are excluded from both diluted weighted average number of common shares
outstanding and diluted earnings per
share.
|
|
|
Use
of Estimates
|
|
|
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
|
|
|
Fair
value of financial instruments
|
Prepaid
expenses, accrued expenses, notes payable, and amounts due to and from related
parties are carried in the financial statements at amounts which approximate
fair value.
|
|
Stock-Based
Compensation
|
Stock-based
compensation related to non-employees is recognized as compensation expense in
the accompanying consolidated statements of operations and is based on the fair
value of the services received or the fair value of the equity instruments
issued, whichever is more readily determinable. The Company’s accounting policy
for equity instruments issued to consultants and vendors in exchange for goods
and services follows the provisions of EITF 96-18, “Accounting for Equity
Instruments That are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services” and EITF 00-18, “Accounting
Recognition for Certain Transactions Involving Equity Instruments granted to
Other Than Employees.” The measurement date for the fair value of the equity
instruments issued is determined at the earlier of (i) the date at which a
commitment for performance by the consultant or vendor is reached or (ii) the
date at which the consultant or vendor’s performance is complete. In the case of
equity instruments issued to consultants, the fair value of the equity
instrument is recognized over the term of the consulting agreement.
|
Note
C -
|
Recently
Issued Accounting Standards
|
|
|
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 157, "Fair Value
Measurements”. SFAS 157 defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair
value measurements. SFAS 157 is effective as of the beginning
of the first fiscal year that begins after November 15,
2007. As such, the Company is required to adopt these
provisions at the beginning of the fiscal year ended December,
2008. The adoption of SFAS 157 did not have a material effect
on its financial statements.
|
|
|
-
continued -
|
- 8
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
C -
|
Recently
Issued Accounting Standards -
continued
|
|
|
In
February 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 159, "The Fair
Value Option for Financial Assets and Financial Liabilities, including an
amendment of FASB Statement No. 115”. SFAS 159 permits entities
to choose to measure many financial instruments and certain other items at
fair value at specified election dates. This Statement applies
to all entities, including not-for-profit organizations. SFAS
159 is effective as of the beginning of an entity’s first fiscal year that
begins after November 15, 2007. As such, the Company is
required to adopt these provisions at the beginning of the fiscal year
ended December, 2008. The adoption of SFAS 159 did not have a
material effect on its financial
statements.
|
|
|
In
December 2007, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (“SFAS”) No. 160, "Non-controlling
Interests in Financial Statements, an amendment of ARB No.
51”. SFAS 160 establishes accounting and reporting standards
for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS 160 is effective for
fiscal years, and interim periods within those fiscal years, beginning on
or after December 15, 2008. As such, the Company is required to
adopt these provisions at the beginning of the fiscal year ended December,
2009. The Company is currently evaluating the impact of SFAS
160 on its financial statements but does not expect it to have a material
effect.
|
|
|
In
December 2007, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (“SFAS”) No. 141(R), "Business
Combinations”. SFAS 141(R) establishes principles and
requirements for how the acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, an
any non-controlling interest in the acquiree, recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain
purchase, and determines what information to disclose to enable users of
the financial statements to evaluate the nature and financial effects of
the business combination. SFAS 141(R) is effective for fiscal
years, and interim periods within those fiscal years, beginning on or
after December 15, 2008. As such, the Company is required to
adopt these provisions at the beginning of the fiscal year ended
December 31, 2009. The Company is currently
evaluating the impact of SFAS 141(R) on its financial statements but does
not expect it to have a material
effect.
|
In March
2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standard (“SFAS”) No. 161, "Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133”. SFAS 161 requires enhanced disclosures about an entity’s
derivative and hedging activities. SFAS 161 is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008 with early application encouraged. As such, the
Company is required to adopt these provisions at the beginning of the fiscal
year ended December 31, 2009. The Company is currently evaluating the
impact of SFAS 161 on its financial statements but does not expect it to have a
material effect.
|
|
-
continued -
|
- 9
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
C -
|
Recently
Issued Accounting Standards -
continued
|
In May 2008, the Financial Accounting
Standards Board (“FASB”) issued Statement of Financial Accounting Standard
(“SFAS”) No. 163, "Accounting
for Financial Guarantee Insurance Contracts—an interpretation of FASB Statement
No. 60" (“SFAS 163”). SFAS 163 interprets Statement 60 and
amends existing accounting pronouncements to clarify their application to the
financial guarantee insurance contracts included within the scope of that
Statement. SFAS 163 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and all interim periods within
those fiscal years. As such, the Company is required to adopt these
provisions at the beginning of the fiscal year ended December 31,
2009. The Company is currently evaluating the impact of SFAS 163 on
its financial statements but does not expect it to have a material
effect.
In May
2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standard (“SFAS”) No. 165, "Subsequent Events" (“SFAS
165”). SFAS 165 establishes principles and requirements for
subsequent events. SFAS 165 is effective for interim or annual
financial periods ending after June 15, 2009. As such, the Company is
required to adopt this standard in the current period. Adoption of
SFAS 165 did not have a significant effect on the Company’s financial
statements.
In June
2009, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 167
“Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”). SFAS 167 improves
financial reporting by enterprises involved with variable interest entities and
to address (1) the effects on certain provisions of FASB Interpretation No. 46
(revised December 2003), “Consolidation of Variable Interest Entities”, as a
result of the elimination of the qualifying special-purpose entity concept in
SFAS 166 and (2) constituent concerns about the application of certain key
provisions of Interpretation 46(R), including those in which the accounting and
disclosures under the Interpretation do not always provide timely and useful
information about an enterprise’s involvement in a variable interest entity.
SFAS 167 is effective as of the beginning of each reporting entity’s first
annual reporting period that begins after November 15, 2009, for
interim periods within that first annual reporting period, and for interim and
annual reporting periods thereafter. As such, the Company is required to adopt
this standard at the beginning of fiscal year end December 31, 2010. The Company
is evaluating the impact the adoption of SFAS 167 will have on its consolidated
financial statements.
In June
2009, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard (“SFAS”) No. 168, "The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles”. SFAS 168 replaces SFAS 162 and establishes the
FASB Accounting Standards
Codification as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with GAAP. SFAS 168
is effective for financial statements issued for interim and annual periods
ending after September 15, 2009. The Company is currently evaluating
the impact of SFAS 168 on its financial statements but does not expect it to
have a material effect.
- 10
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
D -
|
Property
and Equipment
|
|
|
Property
and equipment consisted of the
following:
|
|
December
31,
|
2008
|
2007
|
||||||
|
Machinery
and Equipment
|
$ | 49,402 | $ | 35,802 | ||||
|
Office
Equipment
|
1,774 | –– | ||||||
| $ | 51,176 | $ | 35,802 | |||||
|
Less: Accumulated
Depreciation
|
15,020 | 1,040 | ||||||
|
Net
Property and Equipment
|
$ | 36,156 | $ | 34,762 | ||||
|
|
Depreciation
expense for the years ended December 31, 2008 and 2007 was $13,980 and
$1,040, respectively.
|
|
Note
E -
|
Licensing
Rights
|
|
|
Licensing
Rights were bought in February 2006 and have a life of 25 years. However,
since the Company was in the development stage in 2007 and 2006 the rights
are being amortized over 23 years and consist of the
following:
|
|
December
31,
|
2008
|
2007
|
||||||
|
Licensing
Rights
|
$ | 150,000 | $ | 150,000 | ||||
|
Less: Accumulated
Depreciation
|
6,498 | –– | ||||||
|
Net
Licensing Rights
|
$ | 143,502 | $ | 150,000 | ||||
|
|
Amortization
expense for the years ended December 31, 2008 and 2007 was $6,498 and
$-0-, respectively. Amortization for the five (5) years is expected
to be $6,498 annually.
|
|
Note
F -
|
Transactions
with Prior Owners
|
|
|
In
January, 2008, Cono Inc. issued 3,000,000 shares of common stock to the
former owners of the license rights of the Pizza Cono
Products. The shares were issued by agreement between Cono,
Inc. and the former owners in satisfaction of any future claims whether
known or unknown with regards to the license rights. In
addition to the shares issued the Company also issued a note payable to
the former owners in the amount of $200,000. The note contains no
established repayment terms and interest has not been imputed in the
accompanying financial
statements.
|
- 11
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
G -
|
Related
Party Transactions
|
|
|
On
July 14, 2008, (the date of Edesia’s inception), the Company entered into
an operating agreement with Edesia Emprise, LLC to manufacture product for
the Company. The CEO of the Company owned 50% of Edesia until July 21,
2008 when he transferred his interest to a relative. At the date of the
transfer, Edesia had no assets or business
operations.
|
|
|
Due
from Related Party consists of monies advanced on behalf of Edesia
Emprise, LLC for capital expenditures. The Company purchased
manufacturing equipment on behalf of Edesia to be used by an unrelated
entity for the production of the pizza cones products. The manufactured
pizza cone products will be resold by Cono and its licensees. Production
of the pizza cones under the agreement began in March,
2009.
|
|
|
Due
to Officer
|
|
|
Certain
disbursements of the Company have been paid by an officer of the
Company. The balance at December 31, 2008 and 2007 was $568,828
and $164,602, respectively. There are no established repayment
terms. For the years ended December 31, 2008 and 2007, the
Company has imputed interest at the prime rate of 3.25% and 7.25%,
respectively. Interest expense charged to operations was $11,918 and
$5,967, for the years ended December 31, 2008 and 2007,
respectively.
|
|
Note
H -
|
Going
Concern
|
|
|
The
Company’s financial statements have been presented on the basis that it is
a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
has reported recurring losses from operations. As a result,
there is an accumulated deficit of $980,085 at December 31,
2008.
|
|
|
The
Company’s continued existence is dependent upon its ability to raise
capital. The financial statements do not include any
adjustments that might be necessary should the Company be unable to
continue as a going concern.
|
|
Note
I -
|
Income
Tax Compliance
|
The
Company is not in compliance with filing its required income tax
returns. Since the Company has had continuous losses and has
available net operating losses, the Company believes that any tax liability
would not be material. Deferred taxes are provided for the temporary differences
between the financial reporting basis and the tax reporting basis of the
Company’s assets and liabilities. The temporary differences between
financial reporting and income tax purposes are primarily net operating loss
carry forwards for income tax purposes. A valuation allowance is recorded for
deferred tax assets when management determines it is more likely than not that
such assets will not be realized.
A full
valuation allowance has been established against the deferred tax assets for the
years ended December 31, 2008 and 2007as utilization of the loss carry forwards
and realization of other deferred tax assets cannot be reasonably
assured.
- 12
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
J -
|
Licensing
Revenue
|
|
|
On
July 9, 2008, (subsequently amended in October 2009) the Company entered
into a Supplier/Distribution agreement with Pino Gelato, Inc., an
unrelated entity. The agreement grants the exclusive
manufacture and distribution rights to Pino Gelato, Inc. for the
production of pizza cono food products for certain specified geographical
territories. The term of the agreement is for ten (10) years
with an automatic renewal for another ten (10) years. In
addition, Pino Gelato, Inc. has the exclusive rights to enter into
franchise agreements with third parties to market and sell the pizza cono
food products.
|
|
|
In
exchange for the rights granted to Pino Gelato under the agreement, the
Company is to receive total cash consideration of
$100,000. Pursuant to the amended agreement, the consideration
is to be paid in installments as
follows:
|
|
·
|
$75,000
has been paid to date and prior to the execution of the amended
contract.
|
|
|
·
|
$25,000
to be paid upon the execution of the amended agreement and the
installation of the equipment together with equipment
training.
|
|
|
As
an inducement to buy the distribution and franchise rights by Pino Gelato,
Inc. the Company agreed to issue 375,000 shares of common stock to Pino
upon receipt of the first and final installment of the
agreement. Common stock amounting to 250,000 shares were issued
prior to the execution of the amendment in October, 2009 with the
remaining 125,000 shares to be issued upon receipt of the final $25,000
cash payment from Pino. The fair market value of the common
stock issued in connection with the installment payments made has been
recorded as an offset to the payments received under the
agreement. The payments received have been recorded as deferred
licensing revenue in the accompanying financial statements. The
licensing revenue is being amortized to revenue over the initial license
term of ten (10) years.
|
|
|
In
addition to the $100,000 cash consideration, the Company is entitled to
royalties on the sale of all Pino Gelato’s pizza cono food products in the
amount of $9,500. Furthermore, the Company is entitled to ten
(10) percent of all franchise revenue generated by Pino
Gelato.
|
- 13
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
K -
|
Subsequent
Events
|
|
|
In
October, 2009, the Company through its related party entity, Edesia
Emprise, LLC, terminated an agreement (which began in March, 2009) with an
unrelated party for the manufacture of pizza cone products. The
termination was reached in mutual agreement with the counter party and
mutual releases were granted in connection wit the
termination.
|
|
|
On
November 6, 2009, Cono Italiano (Delaware) entered into a Commitment
Letter, pursuant to which, one of our shareholders, Lara Mac has agreed to
provide financing to Cono Italiano, Inc., with such funds as the Company’s
Board of Directors shall deem to be sufficient to maintain the Company’s
ordinary course of business operations (the “Commitment
Amount”). We may draw on the Commitment Amount in monthly
tranches in accordance with our operating requirements as set forth in our
business plan. The available Commitment Amount will be reduced by the
aggregate cash proceeds received by the Company which are derived from the
issuance of any equity securities and Company gross revenues. Draws on the
Commitment Amount will be made on terms of unsecured notes, with interest
set on each note as of the date of the draw at prime rate plus two percent
per annum. The notes will mature and become repayable thirty calendar days
after demand at any time following the earlier of (a) December 31, 2010 or
(b) the date upon which we are in receipt of revenues or proceeds from the
sales of equity securities. We will give Lara Mac customary
representations and warranties regarding the good standing of our Company
and status of progress in respect of our Company business plan prior to
each draw on the Commitment Amount, and we will provide certifications and
covenants regarding use of proceeds of each draw, which will be in
customary forms reasonably requested by Lara Mac as determined by
reference to similar lenders making similar loans to similar companies.
Lara Mac will not be required to make any loans under the Commitment
Amount to us if we are unable to make the representations, warranties,
certifications or covenants, or if we are in breach of any previously
given representations, warranties, certifications or covenants. If we
breach any of the notes, the default rate will be 15% per annum and Lara
Mac may seek recourse against our company for repayment of all of the
notes.
|
|
|
On
November 11, 2009, Cono Italiano (Delaware) and Edesia Emprise, LLC
entered into a Master Manufacturing Agreement. Pursuant to this
Master Manufacturing Agreement, Edesia Emprise, LLC will produce the
Company’s Pizza Cono product. Cono Italiano (Delaware) has
agreed to pay Edesia Emprise, LLC the costs of production plus fifteen
percent (15%). This Master Manufacturing Agreement has a five
(5) year term and will automatically renew unless cancelled by one of the
parties pursuant to its terms. This Master Manufacturing
Agreement is exclusive within the United States. Edesia
Emprise, LLC may either produce this product directly or through a
subcontractor.
|
|
|
Edesia
Emprise, LLC has advised Cono Italiano (Delaware) that it has entered into
its first subcontract agreement. Sunrise Bakery, located in
Brooklyn, New York, will produce the cones for the Pizza Cono product on
behalf of Edesia Emprise, LLC.
|
|
|
The
Company entered into a share exchange agreement whereby Cono would
exchange all of its common stock for the stock of Tiger Renewable Energy,
Inc.(TRE) on a share for share basis.
The agreement will become effective
when all of the contractual provisions have been
satisfied.
|
|
|
-
continued -
|
- 14
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Long
Branch, New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
K -
|
Subsequent
Events - continued
|
|
|
Prior
to entering into the share exchange agreement, the principal stockholder
of Cono became a stockholder of TRE, either through direct ownership or
through an entity in which he controls, effectively gaining control of
TRE.
|
|
|
Additionally,
TRE entered into a management services contract with the entity controlled
by the principal stockholder of Cono. Pursuant to the management services
agreement, the entity will provide consulting and other strategic advisory
services to TRE. In exchanges for the services, the entity will receive
shares of TRE as compensation for those
services
|
|
|
On
August 10, 2009, TRE changed its name to Cono Italiano, Inc. - a Nevada
corporation.
|
|
|
The
exchange of shares between Cono Italiano, Inc. - Delaware and Cono
Italiano, Inc. - Nevada will be accounted for as a recapitalization of the
Companies, as the majority stockholder of Cono Italiano, Inc. will be the
majority stockholder of the surviving company. Pursuant to the
accounting for a recapitalization, the historical carrying value of the
assets and liabilities of Cono Italiano, Inc. will carry over to the
surviving company.
|
|
|
Subsequent
events were evaluated through November 11, 2009, the date the financial
statements were issued.
|
- 15
-
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the
Board of Directors and Stockholders of
Cono
Italiano, Inc.
We have
reviewed the balance sheets of Cono Italiano, Inc. as of June 30, 2009 and 2008,
and the related statements of operations, changes in stockholders’ equity
(deficit) and cash flows for the six-month periods then ended. These financial
statements are the responsibility of the company’s management.
We
conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with standards
of the Public Company Accounting Oversight Board (United States), the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on
our review we are not aware of any material modifications that should be made to
the accompanying financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States of
America.
We have
previously audited, in accordance with auditing standards of the Public Company
Accounting Oversight Board (United States), the balance sheet of Cono Italiano,
Inc. as of December 31, 2008 (presented herein), and the related statements of
operations, changes in stockholders’ equity (deficit) and cash flows for the
year then ended (not presented herein); and in our report dated October 30,
2009, we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying condensed balance sheet
as of December 31, 2008, is fairly stated, in all material respects, in relation
to the balance sheet from which it has been derived.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note H to the financial
statements, the Company’s significant operating losses raise substantial doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
EFP
Rotenberg, LLP
Rochester,
New York
November
11, 2009
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
|
FINANCIAL
REPORTS
|
|
AT
|
|
JUNE
30, 2009
|
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
TABLE
OF CONTENTS
|
Balance
Sheets at June 30, 2009 (Unaudited) and December 31, 2008
|
2
|
|||
|
Statements
of Changes in Stockholders’ Equity (Deficit) for the Six Months Ended June
30, 2009 and 2008 (Unaudited)
|
3
|
|||
|
Statements
of Operations for the Six Months Ended June 30, 2009 and 2008
(Unaudited)
|
4
|
|||
|
Statements
of Cash Flows for the Six Months Ended June 30, 2009 and 2008
(Unaudited)
|
5
|
|||
|
Notes
to Financial Statements
|
6-15
|
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
BALANCE
SHEETS
|
(Unaudited)
|
||||||||
|
June
30,
|
December
31,
|
|||||||
|
2009
|
2008
|
|||||||
|
ASSETS
|
||||||||
|
Cash
and Cash Equivalents
|
$ | 46,501 | $ | 724 | ||||
|
Due
from Related Parties
|
144,000 | 55,500 | ||||||
|
Prepaid
Expenses
|
12,115 | 4,615 | ||||||
|
Total
Current Assets
|
202,616 | 60,839 | ||||||
|
Property
and Equipment - Net of Accumulated Depreciation
|
29,487 | 36,156 | ||||||
|
Other
Assets
|
||||||||
|
Licensing
Rights - Net of Accumulated Amortization
|
140,253 | 143,502 | ||||||
|
Total
Assets
|
$ | 372,356 | $ | 240,497 | ||||
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT
|
||||||||
|
Liabilities
|
||||||||
|
Accrued
Interest
|
$ | 24,542 | $ | 17,885 | ||||
|
Deferred
Revenue
|
90,070 | 45,125 | ||||||
|
Notes
Payable
|
200,000 | 200,000 | ||||||
|
Due
to Officer
|
616,650 | 568,828 | ||||||
|
Total
Liabilities
|
931,262 | 831,838 | ||||||
|
Stockholders'
Deficit
|
||||||||
|
Common
Stock - $.0001 Par; 150,000,000 and 500,000,000 Shares
Authorized,
|
||||||||
|
53,950,000
and 53,250,000 Shares Issued and Outstanding, respectively
|
5,395 | 5,325 | ||||||
|
Additional
Paid-In-Capital
|
481,618 | 383,419 | ||||||
|
Deficit
|
(1,045,919 | ) | (980,085 | ) | ||||
|
Total
Stockholders' Deficit
|
(558,906 | ) | (591,341 | ) | ||||
|
Total
Liabilities and Stockholders' Deficit
|
$ | 372,356 | $ | 240,497 | ||||
The
accompanying notes are an integral part of these financial
statements.
- 2
-
(FORMERLY
KNOWN AS JANEX INTERNATIONAL INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
STATEMENTS
OF CHANGES IN EQUITY (DEFICIT) - (UNAUDITED)
|
Common
Stock
|
Additional
|
Total
|
||||||||||||||||||
|
$
.0001 Par
|
Paid-In
|
Stockholder's
|
||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
Deficit
|
Equity
(Deficit)
|
||||||||||||||||
|
Balance
- January 1, 2008
|
6,000,000 | $ | 600 | $ | 164,400 | $ | (50,290 | ) | $ | 114,710 | ||||||||||
|
Additional
Paid-In-Capital - Deemed Distribution
|
— | — | (312,000 | ) | — | (312,000 | ) | |||||||||||||
|
Common
Stock Issued to Prior Owners
|
3,000,000 | 300 | 56,700 | 57,000 | ||||||||||||||||
|
Common
Stock Issued in Exchange for Services
|
41,900,000 | 4,190 | 422,262 | — | 426,452 | |||||||||||||||
|
Net
Loss for the Period Ended
|
— | — | — | (815,907 | ) | (815,907 | ) | |||||||||||||
|
Balance
- June 30, 2008
|
50,900,000 | 5,090 | 331,362 | (866,197 | ) | (529,745 | ) | |||||||||||||
|
Common
Stock Issued in Exchange for Services
|
2,350,000 | 235 | 52,057 | — | 52,292 | |||||||||||||||
|
Net
Loss for the Period Ended
|
— | — | — | (113,888 | ) | (113,888 | ) | |||||||||||||
|
Balance
- December 31, 2008
|
53,250,000 | 5,325 | 383,419 | (980,085 | ) | (591,341 | ) | |||||||||||||
|
Common
Stock Issued in Exchange for Services
|
100,000 | 10 | 3,259 | — | 3,269 | |||||||||||||||
|
Common
Stock Issued for Cash
|
100,000 | 10 | 24,990 | — | 25,000 | |||||||||||||||
|
Common
Stock Issued for Related Party Expense
|
500,000 | 50 | 69,950 | — | 70,000 | |||||||||||||||
|
Net
Loss for the Period
|
— | — | — | (65,834 | ) | (65,834 | ) | |||||||||||||
|
Balance
- June 30, 2009
|
53,950,000 | $ | 5,395 | $ | 481,618 | $ | (1,045,919 | ) | $ | (558,906 | ) | |||||||||
The
accompanying notes are an integral part of these financial
statements.
- 3
-
(FORMERLY
KNOWN AS JANEX INTERNATIONAL INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
STATEMENTS
OF OPERATIONS - UNAUDITED
|
For
the Six Months Ended June 30,
|
2009
|
2008
|
||||||
|
Sales
|
$ | 5,054 | $ | — | ||||
|
Cost
of Sales
|
1,524 | — | ||||||
|
Gross
Profit
|
3,530 | — | ||||||
|
Expenses
|
||||||||
|
Selling
and Direct
|
1,856 | 122,099 | ||||||
|
Compensation
Expense
|
— | 233,333 | ||||||
|
General
and Administrative
|
60,851 | 460,475 | ||||||
|
Interest
Expense
|
6,657 | — | ||||||
|
Total
Expenses
|
69,364 | 815,907 | ||||||
|
Net
Loss for the Period
|
$ | (65,834 | ) | $ | (815,907 | ) | ||
|
Loss
per Share - Basic and Diluted
|
$ | (0.00 | ) | $ | (0.03 | ) | ||
|
Weighted
Average Common Shares Outstanding
|
53,877,072 | 28,223,077 | ||||||
The
accompanying notes are an integral part of these financial
statements.
- 4
-
(FORMERLY
KNOWN AS JANEX INTERNATIONAL INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
STATEMENTS
OF CASH FLOWS - UNAUDITED
|
For
the Six Months Ended June 30,
|
2009
|
2008
|
||||||
|
Cash
Flows from Operating Activities
|
||||||||
|
Net
Loss for the Period
|
$ | (65,834 | ) | $ | (815,907 | ) | ||
|
Adjustments
to Reconcile Net Loss to
|
||||||||
|
Net
Cash Flows from Operating Activities:
|
||||||||
|
Amortization
|
3,249 | — | ||||||
|
Depreciation
|
7,294 | 6,890 | ||||||
|
Interest
on Officer Loan
|
6,657 | — | ||||||
|
Common
Stock Issued in Exchange for Services
|
3,269 | 426,452 | ||||||
|
Expense
to Prior Owners
|
— | 257,000 | ||||||
|
Changes
in Assets and Liabilities:
|
||||||||
|
Prepaid
Expenses
|
(7,500 | ) | (4,615 | ) | ||||
|
Deferred
Revenue
|
44,945 | — | ||||||
|
Net
Cash Flows from Operating Activities
|
(7,920 | ) | (130,180 | ) | ||||
|
Net
Cash Flows from Investing Activities
|
||||||||
|
Purchase
of Property and Equipment
|
(625 | ) | (12,600 | ) | ||||
|
Cash
Flows from Financing Activities
|
||||||||
|
Cash
Proceeds from Sale of Stock
|
25,000 | — | ||||||
|
Cash
Advance to Related Party
|
(18,500 | ) | — | |||||
|
Due
to Officer
|
47,822 | 59,114 | ||||||
|
Net
Cash Flows from Financing Activities
|
54,322 | 59,114 | ||||||
|
Net
Change in Cash and Cash Equivalents
|
45,777 | (83,666 | ) | |||||
|
Cash
and Cash Equivalents - Beginning of Year
|
724 | 100,516 | ||||||
|
Cash
and Cash Equivalents - End of Period
|
$ | 46,501 | $ | 16,850 | ||||
|
Supplemental
Non-Cash Investing and Financing Activities:
|
||||||||
|
Deemed
Distribution
|
$ | — | $ | 312,000 | ||||
|
Common
Stock Issued for Related Party Expense
|
$ | 70,000 | $ | — | ||||
|
Cash
Paid During the Period for:
|
||||||||
|
Interest
|
$ | — | $ | — | ||||
|
Income
Taxes
|
$ | — | $ | — | ||||
The
accompanying notes are an integral part of these financial
statements.
- 5
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
A -
|
The
Company
|
|
|
Merger
and Recapitalization
|
|
Cono Italiano, Inc.,
(Cono, Inc. or the “Company”) was formed as Janex International
Inc. on July 6, 2007 in
the State of Delaware. On January 8, 2008 Janex
International Inc. changed its name to Cono Italiano,
Inc.
|
|
|
Cono
Italiano, LLC (Cono, LLC) was formed on June 27, 2007 as a limited
liability company in the State of New Jersey. Cono, LLC had no
operations and its primary assets were the license rights to manufacture,
market, and distribute “pizza cono”, a unique pizza style food
product.
|
|
|
In
March 2007, the license rights held by the individual founders of Cono,
LLC was sold to The Total Luxury Group (TLG), an unrelated
entity. Subsequently, on January 8, 2008 the license rights
were transferred to Mitchell Brown for the total consideration of
$312,000. The transfer of Cono, LLC (which includes the license
rights) was effected in settlement of an obligation due to Mitchell Brown
by TLG.
|
|
|
On
January 14, 2008, Cono, LLC was sold to Cono, Inc. for the total
consideration of $426,000. In exchange for the 100% interest in
Cono, LLC, the sole member of the LLC received 6,000,000 shares of Cono,
Inc. valued at $114,000 and was issued a promissory note for
$312,000. Mitchell Brown is also a principal stockholder in
Cono, Inc.
|
|
|
The
transaction was accounted for as a recapitalization of Cono, Inc. and
Cono, LLC both companies under common control. As such, the
assets and liabilities of Cono, LLC were carried over to Cono, Inc. at the
historical carrying values.
|
|
|
At
the time of the sale of Cono, LLC to Cono, Inc., Cono had a tangible net
book value of $114,700. Since the assets and liabilities of
Cono, LLC were recorded at their historical carrying amounts after the
merger and recapitalization, the excess of the consideration paid of
$426,000 over the carrying value of $114,700 had been recorded as a
distribution to the stockholder.
|
|
|
The
condensed financial statements of Cono Italiano, Inc., included herein
have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission (the
“SEC”). Certain information and footnote disclosures normally
included in financial statements prepared in conjunction with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading.
These condensed financial statements should be read in conjunction with
the annual audited financial statements and the notes thereto included in
the Company’s Form 8K, and other reports filed with the
SEC.
|
|
|
The
accompanying unaudited interim financial statements reflect all
adjustments of a normal and recurring nature which are, in the opinion of
management, necessary to present fairly the financial position, results of
operations and cash flows of the Company for the interim periods
presented. The results of operations for these periods are not
necessarily comparable to, or indicative of, results of any other interim
period or for the fiscal year taken as a whole. Certain
information that is not required for interim financial reporting purposes
has been omitted.
|
- 6
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
B -
|
Summary
of Significant Accounting Policies
|
|
|
Method
of Accounting
|
|
|
The
Company maintains its books and prepares its financial statements on the
accrual basis of accounting.
|
|
|
Cash
and Cash Equivalents
|
|
|
Cash
and cash equivalents include time deposits, certificates of deposit, and
all highly liquid debt instruments with original maturities of three
months or less. The Company maintains cash and cash equivalents
at financial institutions, which periodically may exceed federally insured
amounts.
|
|
|
Property,
Equipment and Depreciation
|
|
|
Property
and equipment are reflected at cost of acquisition and are depreciated on
various methods utilizing the following estimated
lives:
|
|
Machinery
and Equipment
|
5 -
7 Years
|
|
|
Office
Equipment
|
|
3 -
7 Years
|
|
|
Maintenance
and repairs are expensed as incurred. The cost of property and
equipment retired or otherwise disposed of and the related accumulated
depreciation are removed from the accounts and reflected as other income
or expense.
|
|
|
Long-lived
Assets
|
|
|
The
Company accounts for impaired long-lived assets in accordance with
Statement of Financial Accounting Standards No. 144 (“SFAS 144”),
“Accounting for the Impairment or Disposal of Long-Lived
Assets”. This standard prescribes the method for asset
impairment evaluation for long-lived assets and certain identifiable
intangibles that are either held and used or are to be disposed
of. The Company evaluates the ability to recover long-lived
assets whenever events or circumstances indicate that the carrying value
of the asset may not be recoverable. In the event assets are
impaired, losses are recognized to the extent the carrying value exceeds
the fair value. In addition, the Company reports assets to be
disposed of at the lower of the carrying amount or the fair market value
less selling costs.
|
|
|
Intangible
Assets
|
|
|
Intangible
assets consist of licensing rights. The Company applies an
impairment evaluation whenever events or changes in business circumstances
indicate that the carrying value of the intangible assets may not be
recoverable. Other intangible assets are amortized on a
straight-line basis over their estimated economic lives. The
Company believes that the straight-line method of amortization reflects an
appropriate allocation of the cost of the intangible assets to earnings in
proportion to the amount of economic benefits obtained annually by the
Company.
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|
|
-
continued -
|
- 7
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
B -
|
Summary
of Significant Accounting Policies -
continued
|
|
|
Income
Taxes
|
|
|
The
Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, “Accounting for Income Taxes”,
using the asset and liability approach, which requires recognition of
deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying amounts and the
tax basis of such assets and liabilities. This method utilizes
enacted statutory tax rates in effect for the year in which the temporary
differences are expected to reverse and gives immediate effect to changes
in income tax rates upon enactment. Deferred tax assets are
recognized, net of any valuation allowance, for temporary differences and
net operating loss and tax credit carry forwards. Deferred
income tax expense represents the change in net deferred assets and
liability balances.
|
|
|
Earnings
per Share
|
|
|
Earnings per share
of common stock are computed in accordance with SFAS No, 128, “Earnings
per Share”. Basic earnings per share are computed by
dividing income or loss available to common shareholders by the
weighted-average number of common shares outstanding for each
period. Diluted earnings per share are calculated by adjusting
the weighted average number of shares outstanding assuming conversion of
all potentially dilutive stock options, warrants and convertible
securities, if dilutive. Common stock equivalents that are anti-dilutive
are excluded from both diluted weighted average number of common shares
outstanding and diluted earnings per
share.
|
|
|
Use
of Estimates
|
|
|
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
|
|
|
Fair
value of financial instruments
|
Prepaid
expenses, accrued expenses, notes payable, and amounts due to and from related
parties are carried in the financial statements at amounts which approximate
fair value.
|
|
Stock-Based
Compensation
|
Stock-based
compensation related to non-employees is recognized as compensation expense in
the accompanying statements of operations and is based on the fair value of the
services received or the fair value of the equity instruments issued, whichever
is more readily determinable. The Company’s accounting policy for equity
instruments issued to consultants and vendors in exchange for goods and services
follows the provisions of EITF 96-18, “Accounting for Equity Instruments That
are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services” and EITF 00-18, “Accounting Recognition for Certain
Transactions Involving Equity Instruments granted to Other Than Employees.” The
measurement date for the fair value of the equity instruments issued is
determined at the earlier of (i) the date at which a commitment for performance
by the consultant or vendor is reached or (ii) the date at which the consultant
or vendor’s performance is complete. In the case of equity instruments issued to
consultants, the fair value of the equity instrument is recognized over the term
of the consulting agreement.
- 8
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
C -
|
Recently
Issued Accounting Standards
|
|
|
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 157, "Fair Value
Measurements”. SFAS 157 defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair
value measurements. SFAS 157 is effective as of the beginning
of the first fiscal year that begins after November 15,
2007. As such, the Company is required to adopt these
provisions at the beginning of the fiscal year ended December,
2008. The adoption of SFAS 157 did not have a material effect
on its financial statements.
|
|
|
In
February 2007, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 159, "The Fair
Value Option for Financial Assets and Financial Liabilities, including an
amendment of FASB Statement No. 115”. SFAS 159 permits entities
to choose to measure many financial instruments and certain other items at
fair value at specified election dates. This Statement applies
to all entities, including not-for-profit organizations. SFAS
159 is effective as of the beginning of an entity’s first fiscal year that
begins after November 15, 2007. As such, the Company is
required to adopt these provisions at the beginning of the fiscal year
ended December, 2008. The adoption of SFAS 159 did not have a
material effect on its financial
statements.
|
|
|
In
December 2007, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (“SFAS”) No. 160, "Non-controlling
Interests in Financial Statements, an amendment of ARB No.
51”. SFAS 160 establishes accounting and reporting standards
for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary. SFAS 160 is effective for
fiscal years, and interim periods within those fiscal years, beginning on
or after December 15, 2008. As such, the Company is required to
adopt these provisions at the beginning of the fiscal year ended December
31, 2009. The adoption of SFAS 160 did not have a material
effect on its financial statements.
|
|
|
In
December 2007, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (“SFAS”) No. 141(R), "Business
Combinations”. SFAS 141(R) establishes principles and
requirements for how the acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, an
any non-controlling interest in the acquiree, recognizes and measures the
goodwill acquired in the business combination or a gain from a bargain
purchase, and determines what information to disclose to enable users of
the financial statements to evaluate the nature and financial effects of
the business combination. SFAS 141(R) is effective for fiscal
years, and interim periods within those fiscal years, beginning on or
after December 15, 2008. As such, the Company is required to
adopt these provisions at the beginning of the fiscal year ended
December 31, 2009. The
adoption of SFAS 141(R) did not have a material effect on its financial
statements.
|
|
|
-
continued -
|
- 9
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
C -
|
Recently
Issued Accounting Standards -
continued
|
In March
2008, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standard (“SFAS”) No. 161, "Disclosures about Derivative
Instruments and Hedging Activities—an amendment of FASB Statement No.
133”. SFAS 161 requires enhanced disclosures about an entity’s
derivative and hedging activities. SFAS 161 is effective for
financial statements issued for fiscal years and interim periods beginning after
November 15, 2008 with early application encouraged. As such, the
Company is required to adopt these provisions at the beginning of the fiscal
year ended December 31, 2009. The adoption of SFAS 161 did not have a
material effect on its financial statements.
In May 2008, the Financial Accounting
Standards Board (“FASB”) issued Statement of Financial Accounting Standard
(“SFAS”) No. 163, "Accounting
for Financial Guarantee Insurance Contracts—an interpretation of FASB Statement
No. 60" (“SFAS 163”). SFAS 163 interprets Statement 60 and
amends existing accounting pronouncements to clarify their application to the
financial guarantee insurance contracts included within the scope of that
Statement. SFAS 163 is effective for financial statements issued for
fiscal years beginning after December 15, 2008, and all interim periods within
those fiscal years. As such, the Company is required to adopt these
provisions at the beginning of the fiscal year ended December 31,
2009. The adoption of SFAS 163 did not have a material effect on its
financial statements.
In May
2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standard (“SFAS”) No. 165, "Subsequent Events" (“SFAS
165”). SFAS 165 establishes principles and requirements for
subsequent events. SFAS 165 is effective for interim or annual
financial periods ending after June 15, 2009. As such, the Company is
required to adopt this standard in the current period. Adoption of
SFAS 165 did not have a significant effect on the Company’s financial
statements.
In June
2009, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 167
“Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”). SFAS 167 improves
financial reporting by enterprises involved with variable interest entities and
to address (1) the effects on certain provisions of FASB Interpretation No. 46
(revised December 2003), “Consolidation of Variable Interest Entities”, as a
result of the elimination of the qualifying special-purpose entity concept in
SFAS 166 and (2) constituent concerns about the application of certain key
provisions of Interpretation 46(R), including those in which the accounting and
disclosures under the Interpretation do not always provide timely and useful
information about an enterprise’s involvement in a variable interest entity.
SFAS 167 is effective as of the beginning of each reporting entity’s first
annual reporting period that begins after November 15, 2009, for
interim periods within that first annual reporting period, and for interim and
annual reporting periods thereafter. As such, the Company is required to adopt
this standard at the beginning of fiscal year end December 31, 2010. The Company
is evaluating the impact the adoption of SFAS 167 will have on its consolidated
financial statements.
-
continued -
- 10
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
C -
|
Recently
Issued Accounting Standards -
continued
|
In June
2009, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standard (“SFAS”) No. 168, "The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles”. SFAS 168 replaces SFAS 162 and establishes the
FASB Accounting Standards
Codification as the source of authoritative accounting principles
recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with GAAP. SFAS 168
is effective for financial statements issued for interim and annual periods
ending after September 15, 2009. The Company is currently evaluating
the impact of SFAS 168 on its financial statements but does not expect it to
have a material effect.
|
Note
D -
|
Property
and Equipment
|
|
|
Property
and equipment consisted of the
following:
|
|
June
30,
|
December
31,
|
|||||||
|
2009
|
2008
|
|||||||
|
Machinery
and Equipment
|
$ | 49,402 | $ | 49,402 | ||||
|
Office
Equipment
|
2,398 | 1,774 | ||||||
| $ | 51,800 | $ | 51,176 | |||||
|
Less: Accumulated
Depreciation
|
22,313 | 15,020 | ||||||
|
Net
Property and Equipment
|
$ | 29,487 | $ | 36,156 | ||||
|
|
Depreciation
expense for the six months ended June 30, 2009 and 2008 was $7,294 and
$6,890, respectively.
|
|
Note
E -
|
Licensing
Rights
|
|
|
Licensing
Rights were bought in February 2006 and have a life of 25 years. However,
since the Company was in the development stage in 2007 and 2006 the rights
are being amortized over 23 years and consist of the
following:
|
|
June
30,
|
December
31,
|
|||||||
|
2009
|
2008
|
|||||||
|
Licensing
Rights
|
$ | 150,000 | $ | 150,000 | ||||
|
Less: Accumulated
Depreciation
|
9,747 | 6,498 | ||||||
|
Net
Licensing Rights
|
$ | 140,253 | $ | 143,502 | ||||
|
|
Amortization
expense for the six months ended June 30, 2009 and 2008 was $3,249 and
$-0-, respectively. Amortization for the five (5) years is expected to be
$6,498 annually.
|
- 11
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
F -
|
Transactions
with Prior Owners
|
|
|
In
January, 2008, Cono Inc. issued 3,000,000 shares of common stock to the
former owners of the license rights of the Pizza Cono
Products. The shares were issued by agreement between Cono,
Inc. and the former owners in satisfaction of any future claims whether
known or unknown with regards to the license rights. In
addition to the shares issued the Company also issued a note payable to
the former owners in the amount of $200,000. The note contains no
established repayment terms and interest has not been imputed in the
accompanying financial statements.
|
|
Note
G -
|
Related
Party Transactions
|
|
|
On
July 14, 2008, (the date of Edesia’s inception), the Company entered into
an operating agreement with Edesia Emprise, LLC to manufacture product for
the Company. The CEO of the Company owned 50% of Edesia until July 21,
2008 when he transferred his interest to a relative. At the date of the
transfer, Edesia had no assets or business
operations.
|
|
|
Due
from Related Party consists of monies advanced on behalf of Edesia
Emprise, LLC and Cono Italiano Inc.
- Nevada.
|
|
|
The
Company purchased manufacturing equipment on behalf of Edesia to be used
by an unrelated entity for the production of the pizza cones products. The
manufactured pizza cone products will be resold by Cono and its licensees.
Production of the pizza cones under the agreement began in
March 2009.
|
|
|
Funds
advances to Cono Italiano Inc. - Nevada were for working capital needs in
anticipation of the share exchange (Note K)The advances are non-interest
bearing and is due upon demand. Due from related parties
consist of the following:
|
|
June
30,
|
December
31,
|
|||||||
|
2009
|
2008
|
|||||||
|
Edesia
Emprise, LLC
|
$ | 128,500 | $ | 55,500 | ||||
|
Cono
Italiano Inc. - Nevada
|
15,500 | –– | ||||||
|
Due
from Related Parties
|
$ | 144,000 | $ | 55,500 | ||||
|
|
Due
to Officer
|
|
|
Certain
disbursements of the Company have been paid by an officer of the
Company. The balance at June 30, 2009 and December 31, 2008 was
$616,650 and $568,828, respectively. There are no established
repayment terms. For the six months ended June 30, 2009, the
Company has imputed interest at the prime rate of 2.25%. Interest expense
charged to operations was $6,657 and $-0-, for the six months ended June
30, 2009 and 2008,
respectively.
|
- 12
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
H -
|
Going
Concern
|
|
|
The
Company’s financial statements have been presented on the basis that it is
a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company
has reported recurring losses from operations. As a result,
there is an accumulated deficit of $1,045,919 at June 30,
2009.
|
|
|
The
Company’s continued existence is dependent upon its ability to raise
capital. The financial statements do not include any
adjustments that might be necessary should the Company be unable to
continue as a going concern
|
|
Note
I -
|
Income
Tax Compliance
|
The
Company is not in compliance with filing its required income tax
returns. Since the Company has had continuous losses and has
available net operating losses, the Company believes that any tax liability
would not be material. Deferred taxes are provided for the temporary differences
between the financial reporting basis and the tax reporting basis of the
Company’s assets and liabilities. The temporary differences between
financial reporting and income tax purposes are primarily net operating loss
carry forwards for income tax purposes. A valuation allowance is recorded for
deferred tax assets when management determines it is more likely than not that
such assets will not be realized.
A full
valuation allowance has been established against the deferred tax assets for the
six months ended June 30, 2009 and 2008 as utilization of the loss carry
forwards and realization of other deferred tax assets cannot be reasonably
assured.
|
Note
J -
|
Licensing
Revenue
|
|
|
On
July 9, 2008, (subsequently amended in October 2009) the Company entered
into a Supplier/Distribution agreement with Pino Gelato, Inc., an
unrelated entity. The agreement grants the exclusive
manufacture and distribution rights to Pino Gelato, Inc. for the
production of pizza cono food products for certain specified geographical
territories. The term of the agreement is for ten (10) years
with an automatic renewal for another ten (10) years. In
addition, Pino Gelato, Inc. has the exclusive rights to enter into
franchise agreements with third parties to market and sell the pizza cono
food products.
|
|
|
In
exchange for the rights granted to Pino Gelato under the agreement, the
Company is to receive total cash consideration of
$100,000. Pursuant to the amended agreement, the consideration
is to be paid in installments as
follows:
|
|
·
|
$75,000
has been paid to date and prior to the execution of the amended
contract.
|
|
|
·
|
$25,000
to be paid upon the execution of the amended agreement and the
installation of the equipment together with equipment
training.
|
-
continued -
- 13
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
J -
|
Licensing
Revenue - continued
|
|
|
As
an inducement to buy the distribution and franchise rights by Pino Gelato,
Inc. the Company agreed to issue 375,000 shares of common stock to Pino
upon receipt of the first and final installment of the
agreement. Common stock amounting to 250,000 shares were issued
prior to the execution of the amendment in October, 2009 with the
remaining 125,000 shares to be issued upon receipt of the final $25,000
cash payment from Pino. The fair market value of the common
stock issued in connection with the installment payments made has been
recorded as an offset to the payments received under the
agreement. The payments received have been recorded as deferred
licensing revenue in the accompanying financial statements. The
licensing revenue is being amortized to revenue over the initial license
term of ten (10) years.
|
|
|
In
addition to the $100,000 cash consideration, the Company is entitled to
royalties on the sale of all Pino Gelato’s pizza cono food products in the
amount of $9,500. Furthermore, the Company is entitled to ten
(10) percent of all franchise revenue generated by Pino
Gelato.
|
|
Note
K -
|
Subsequent
Events
|
|
|
In
October, 2009, the Company through its related party entity, Edesia
Emprise, LLC, terminated an agreement (which began in March, 2009) with an
unrelated party for the manufacture of pizza cone products. The
termination was reached in mutual agreement with the counter party and
mutual releases were granted in connection wit the
termination.
|
|
|
On
November 6, 2009, Cono Italiano (Delaware) entered into a Commitment
Letter, pursuant to which, one of our shareholders, Lara Mac has agreed to
provide financing to Cono Italiano, Inc., with such funds as the Company’s
Board of Directors shall deem to be sufficient to maintain the Company’s
ordinary course of business operations (the “Commitment
Amount”). We may draw on the Commitment Amount in monthly
tranches in accordance with our operating requirements as set forth in our
business plan. The available Commitment Amount will be reduced by the
aggregate cash proceeds received by the Company which are derived from the
issuance of any equity securities and Company gross revenues. Draws on the
Commitment Amount will be made on terms of unsecured notes, with interest
set on each note as of the date of the draw at prime rate plus two percent
per annum. The notes will mature and become repayable thirty calendar days
after demand at any time following the earlier of (a) December 31, 2010 or
(b) the date upon which we are in receipt of revenues or proceeds from the
sales of equity securities. We will give Lara Mac customary
representations and warranties regarding the good standing of our Company
and status of progress in respect of our Company business plan prior to
each draw on the Commitment Amount, and we will provide certifications and
covenants regarding use of proceeds of each draw, which will be in
customary forms reasonably requested by Lara Mac as determined by
reference to similar lenders making similar loans to similar companies.
Lara Mac will not be required to make any loans under the Commitment
Amount to us if we are unable to make the representations, warranties,
certifications or covenants, or if we are in breach of any previously
given representations, warranties, certifications or covenants. If we
breach any of the notes, the default rate will be 15% per annum and Lara
Mac may seek recourse against our company for repayment of all of the
notes.
|
-
continued -
- 14
-
CONO
ITALIANO, INC.
(FORMERLY
KNOWN AS JANEX INTERNATIONAL, INC.)
(A
DELAWARE CORPORATION)
Keyport,
New Jersey
NOTES
TO FINANCIAL STATEMENTS
|
Note
K -
|
Subsequent
Events - continued
|
|
|
On
November 11, 2009, Cono Italiano (Delaware) and Edesia Emprise, LLC
entered into a Master Manufacturing Agreement. Pursuant to this
Master Manufacturing Agreement, Edesia Emprise, LLC will produce the
Company’s Pizza Cono product. Cono Italiano (Delaware) has
agreed to pay Edesia Emprise, LLC the costs of production plus fifteen
percent (15%). This Master Manufacturing Agreement has a five
(5) year term and will automatically renew unless cancelled by one of the
parties pursuant to its terms. This Master Manufacturing
Agreement is exclusive within the United States. Edesia
Emprise, LLC may either produce this product directly or through a
subcontractor.
|
|
|
Edesia
Emprise, LLC has advised Cono Italiano (Delaware) that it has entered into
its first subcontract agreement. Sunrise Bakery, located in
Brooklyn, New York, will produce the cones for the Pizza Cono product on
behalf of Edesia Emprise, LLC.
|
|
|
The
Company entered into a share exchange agreement whereby Cono would
exchange all of its common stock for the stock of Tiger Renewable Energy,
Inc.(TRE) on a share for share basis. The agreement will become effective
when all of the contractual provisions have been
satisfied.
|
|
|
|
|
Prior
to entering into the share exchange agreement, the principal stockholder
of Cono became a stockholder of TRE, either through direct ownership or
through an entity in which he controls, effectively gaining control of
TRE.
|
|
|
Additionally,
TRE entered into a management services contract with the entity controlled
by the principal stockholder of Cono. Pursuant to the management services
agreement, the entity will provide consulting and other strategic advisory
services to TRE. In exchanges for the services, the entity will receive
shares of TRE as compensation for those
services
|
|
|
On
August 10, 2009, TRE changed its name to Cono Italiano, Inc. - a Nevada
corporation.
|
|
|
The
exchange of shares between Cono Italiano, Inc. - Delaware and Cono
Italiano, Inc. - Nevada will be accounted for as a recapitalization of the
Companies, as the majority stockholder of Cono Italiano, Inc. will be the
majority stockholder of the surviving company. Pursuant to the
accounting for a recapitalization, the historical carrying value of the
assets and liabilities of Cono Italiano, Inc. will carry over to the
surviving company.
|
|
|
Subsequent
events were evaluated through November 11, 2009, the date the financial
statements were issued.
|
- 15
-
|
Item
14.
|
Changes
in Accountants on Accounting and Financial
Disclosures
|
On
November 12, 2009, the Company dismissed its independent auditor, Paritz and
Company P.A. and appointed EFP Rotenberg LLP, as its independent
auditor. During the Company's fiscal years ended January 31, 2009 and
January 31, 2008, and the interim period since January 31, 2009, the opinion of
Paritz and Company P.A. on the Company's financial statements did not contain an
adverse opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles, except as follows: the
independent auditor's report of Paritz and Company P.A. dated May 18, 2009 (for
the year ended January 31, 2009) contained "going concern" qualifications. These
qualifications questioned the Company’s ability to raise additional funds
through either the sale of equity securities or issuance and stressed the
absence of any resulting adjustments in the financial statements; thus raising
substantial doubts regarding the Company's ability to continue as a going
concern. During the Company's two most recent fiscal years, and through the date
of their dismissal, there were no disagreements with Paritz and Company P.A.,
whether or not resolved, on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to Paritz and Company P.A.’s satisfaction, would
have caused it to make reference to the subject matter of the disagreement(s) in
connection with its report.
On May
12, 2009, the Company dismissed its independent auditor, Raymond Chabot Grant
Thornton, LLP and appointed Paritz and Company P.A., as its independent auditor.
During the Company's two most recent fiscal years the opinion of Raymond Chabot
Grant Thornton, LLP on the Company's financial statements did not contain an
adverse opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles, except as follows: the
independent auditor's reports of Raymond Chabot Grant Thornton, LLP dated May
20, 2008 (for the year ended January 31, 2008) and October 9, 2007 (for the two
month period ended January 31, 2007) contained "going concern" qualifications.
These qualifications questioned the Company’s ability to raise additional funds
through either the sale of equity securities or issuance and stressed the
absence of any resulting adjustments in the financial statements; thus raising
substantial doubts regarding the Company's ability to continue as a going
concern. During the Company's two most recent fiscal years, and through the date
of their dismissal, there were no disagreements with Raymond Chabot Grant
Thornton, LLP, whether or not resolved, on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to Raymond Chabot Grant Thornton, LLP
satisfaction, would have caused it to make reference to the subject matter of
the disagreement(s) in connection with its report. The Company has had no
disagreements with its prior accountants or its current accountants on
accounting matters or financial disclosures.
32
On March
30, 2007, the Company dismissed its independent auditor, Malone & Bailey,
PC. and appointed Raymond Chabot Grant Thornton, LLP, as its independent
auditor. During the Company's two most recent fiscal years the opinion of Malone
& Bailey, PC on the Company's financial statements did not contain an
adverse opinion or disclaimer of opinion and was not qualified or modified as to
uncertainty, audit scope or accounting principles, except as follows: the
independent auditor's report of Malone & Bailey, PC dated March 12, 2007
(for the year ended November 30, 2006) contained "going concern" qualifications.
This qualification questioned the Company’s ability to raise additional funds
through either the sale of equity securities or issuance and stressed the
absence of any resulting adjustments in the financial statements; thus raising
substantial doubts regarding the Company's ability to continue as a going
concern. During the Company's two most recent fiscal years, and through the date
of their dismissal, there were no disagreements with Malone & Bailey, PC,
whether or not resolved, on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to Malone & Bailey, PC's satisfaction, would
have caused it to make reference to the subject matter of the disagreement(s) in
connection with its report. The Company has had no disagreements with its prior
accountants or its current accountants on accounting matters or financial
disclosures.
|
Item
15.
|
Financial
Statements and Exhibits
|
(a) Financial
Statements
1. Financial
Statements for the years ended December 31, 2008 and 2007.
2. Financial
Statements for the six month period ended June 30, 2009 and June 30, 2008
(unaudited).
33
(b) Exhibit
List
Exhibit Description
|
Exhibit
No.
|
Description
of Exhibits
|
|
|
Exhibit
3.1
|
Articles
of Incorporation, incorporated by reference to Exhibit 3.1 to the
Company’s Registration Statement on Form SB-2, filed with the Securities
and Exchange Commission on December 17, 2004.
|
|
|
Exhibit
3.2
|
Bylaws,
incorporated by reference to Exhibit 3.2 to the Company’s Registration
Statement on Form SB-2, filed with the Securities and Exchange Commission
on December 17, 2004.
|
|
|
Exhibit
3.3
|
Certificate
of Amendment to the Articles of Incorporation, dated as of November 11,
2006, incorporated by reference to Exhibit 3.3 to the Company’s Report on
Form 8-K, filed with the Securities and Exchange Commission on November
30, 2006.
|
|
|
Exhibit
3.4
|
Amendment
to the Company’s Bylaws, incorporated by reference to Exhibit 3.4 to the
Company’s Report on Form 8-K, filed with the Securities and Exchange
Commission on July 17, 2007.
|
|
|
Exhibit
3.5
|
Certificate
of Amendment to the Articles of Incorporation, dated as of February 11,
2008.
|
|
|
Exhibit
3.6
|
Certificate
of Amendment to the Articles of Incorporation, dated as of July 31,
2009.
|
|
|
Exhibit
3.7
|
Amendment
to the Company’s Bylaws.
|
|
|
Exhibit
3.8
|
Certificate
of Incorporation of Cono Italiano (Delaware) (formerly known as Janex
International, Inc.).
|
|
|
Exhibit
3.9
|
Certificate
of Amendment of Certificate of Incorporation (Cono Italiano
(Delaware)).
|
|
|
Exhibit
3.10
|
Certificate
of Merger of Foreign Corporation into a Domestic Corporation (Cono
Italiano (Delaware)).
|
|
|
Exhibit
3.11
|
Certificate
of Merger of Domestic Corporation and Foreign Limited Liability Company
(Cono Italiano (Delaware)).
|
|
|
Exhibit
3.12
|
Certificate
of Amendment of Certificate of Incorporation (Cono Italiano
(Delaware)).
|
|
|
Exhibit
3.13
|
Certificate
of Amendment of Certificate of Incorporation (Cono Italiano
(Delaware)).
|
|
|
Exhibit
3.14
|
Certificate
of Correction (Cono Italiano (Delaware)).
|
|
|
Exhibit
10.16
|
Stock
Purchase Agreement by and between the Company and Adagio Marine Ltd, dated
July 27, 2007, incorporated by reference to Exhibit 10.16 to the Company’s
Report on Form 10-QSB, filed with the Securities and Exchange Commission
on September 20, 2007.
|
|
|
Exhibit
10.17
|
Series
A Warrant issued to Adagio Marine Ltd, dated July 27, 2007, incorporated
by reference to Exhibit 10.17 to the Company’s Report on Form 10-QSB,
filed with the Securities and Exchange Commission on September 20,
2007.
|
|
|
Exhibit
10.26
|
Memorandum
by and between the Company, Xinjiang Wangye Brewing Co. Ltd. and Guangdong
Kecheng Trading Co., dated as of June 6, 2007, incorporated by reference
to Exhibit 10.26 to the Company’s Amended Registration Statement Form
SB-2/A, filed with the Securities and Exchange Commission on January 29,
2008.
|
34
|
Exhibit
10.27
|
Exchange
Agreement by and between the Company and DT Crystal Holdings Limited,
dated as of June 19, 2008, incorporated by reference to Exhibit 10.27 to
the Company’s Report on Form 10-Q, filed with the Securities and Exchange
Commission on September 18, 2008.
|
|
|
Exhibit
10.28
|
Exchange
Agreement by and between the Company and Buck Master Overseas, dated as
of August 12, 2008, incorporated by reference to Exhibit 10.28
to the Company’s Report on Form 10-Q, filed with the Securities and
Exchange Commission on December 15, 2008.
|
|
|
Exhibit
10.29
|
Working
Interest Purchase and Sale Agreement, by and between the Company and
Wellington Capital Management Inc., dated as of January 29,
2009.
|
|
|
Exhibit
10.30
|
Assignment
and Assumption Agreement, by and between the Company and DT Crystal
Holdings Limited, dated as of January 31, 2009.
|
|
|
Exhibit
10.31
|
Convertible
Note Agreement, by and between the Company and Wellington Capital
Management Inc., dated as of February 2, 2009.
|
|
|
Exhibit
10.32
|
Termination
of Working Interest Purchase and Sale Agreement, by and between the
Company and Wellington Capital Management Inc., dated as of April 28,
2009, incorporated by reference to Exhibit 10.1 to the Company’s Report on
Form 8-K, filed with the Securities and Exchange Commission on May 5,
2009.
|
|
|
Exhibit
10.33
|
Termination
and Discharge of Convertible Note Agreement, by and between the Company
and Wellington Capital Management Inc., dated as of April 28, 2009,
incorporated by reference to Exhibit 10.2 to the Company’s Report on Form
8-K, filed with the Securities and Exchange Commission on May 5,
2009.
|
|
|
Exhibit
10.34
|
Mutual
Release, by and between the Company and Wellington Capital Management
Inc., incorporated by reference to Exhibit 10.3 to the Company’s Report on
Form 8-K, filed with the Securities and Exchange Commission on May 5,
2009.
|
|
|
Exhibit
10.35
|
Letter
of Intent, by and between the Company and Financial Media Net, Inc., dated
as of March 25, 2009, incorporated by reference to Exhibit 99.1 to the
Company’s Report on Form 8-K, filed with the Securities and Exchange
Commission on March 26, 2009.
|
|
|
Exhibit
10.36
|
Affiliate
Stock Purchase Agreement, dated June 4, 2009, between Gallant Energy
International Inc. and Lara Mac Inc., incorporated by reference to Exhibit
99.1 to Lara Mac Inc.’s Schedule 13D, filed with the Securities and
Exchange Commission on June 15, 2009.
|
|
|
Exhibit
10.37
|
Management
Services Agreement, by and between the Company and Lara Mac Inc., dated as
of June 22, 2009, incorporated by reference to Exhibit 10.37 to the
Company’s Report on Form 10-Q, filed with the Securities and Exchange
Commission on September 14, 2009.
|
|
|
Exhibit
10.38
|
Agreement,
by and between Kono Italia S.r.l & Spuntibreak S.r.l. DBA Pizza Hands
and Cono Italiano LLC, dated as of March 2, 2006.
|
|
|
Exhibit
10.39
|
Distribution
Agreement, by and between Cono Italiano, Inc. and Pino Gelato, Inc., dated
as of July 9, 2008.
|
|
|
Exhibit
10.40
|
Amendment
to Distribution Agreement, by and between Cono Italiano, Inc. and Pino
Gelato, Inc., dated as of July 9,
2008.
|
35
|
Exhibit
10.41
|
Employment
Agreement, by and between Cono Italiano (Delaware) and Mitchell Brown,
dated as of August 1, 2008.
|
|
|
Exhibit
10.42
|
Employment
Agreement, by and between Cono Italiano (Delaware) and Steve Savage, dated
as of August 1, 2008.
|
|
|
Exhibit
10.43
|
Employment
Agreement, by and between Cono Italiano (Delaware) and Joseph Masselli,
dated as of August 1, 2008.
|
|
|
Exhibit
10.44
|
Annulment
Agreement, by and between Cono Italiano (Delaware) and Mitchell Brown,
dated as of August 11, 2009.
|
|
|
Exhibit
10.45
|
Annulment
Agreement, by and between Cono Italiano (Delaware) and Steve Savage, dated
as of August 11, 2009.
|
|
|
Exhibit
10.46
|
Annulment
Agreement, by and between Cono Italiano (Delaware) and Joseph Masselli,
dated as of August 11, 2009.
|
|
|
Exhibit
10.47
|
Settlement
Agreement and Mutual Release, by and between Dough Bros., Inc., John
Allen, Drew Allen, Matt Allen, Edesia Emprise, LLC, Cono Italiano, Inc.,
Mitchell Brown, John Jacobs and Ramona Fantini, dated as of October 22,
2009.
|
|
|
Exhibit
10.48
|
Commitment
Agreement, by and between Cono Italiano (Delaware) and Lara Mac Inc.,
dated as of November 9, 2009.
|
|
|
Exhibit
10.49
|
Master
Manufacturing Agreement, by and between Cono Italiano (Delaware) and
Edesia Emprise, LLC, dated as of November 11, 2009.
|
|
|
Exhibit
10.50
|
Form
of Share Exchange Agreement, by and between the Company and the
shareholders of Cono Italiano (Delaware).
|
|
|
Exhibit
10.51
|
Amendment to the Management
Services Agreement, by and between Lara Mac Inc., Cono Italiano, Inc. (a
Nevada corporation) and Cono Italiano, Inc. (a Delaware corporation),
dated as of November 6, 2009.
|
|
|
Exhibit
14.1
|
Code
of Conduct, incorporated by reference to Exhibit 14.1 to the Company’s
Report on Form 8-K, filed with the Securities and Exchange Commission on
August 31, 2006.
|
|
|
Exhibit
14.2
|
Equity
Incentive Plan, incorporated by reference to Exhibit 14.2 to the Company’s
Report on Form 10-QSB, filed with the Securities and Exchange Commission
on October 23, 2006.
|
|
|
Exhibit
14.3
|
Audit
Committee Charter, incorporated by reference to Exhibit 14.3 to the
Company’s Report on Form 10-QSB, filed with the Securities and Exchange
Commission on October 23, 2006.
|
|
|
Exhibit
14.4
|
Whistleblower
Procedures Policy, incorporated by reference to Exhibit 14.4 to the
Company’s Report on Form 10-QSB, filed with the Securities and Exchange
Commission on October 23, 2006.
|
|
|
Exhibit
14.5
|
Governance
Charter, incorporated by reference to Exhibit 14.5 to the Company’s Report
on Form 10-QSB, filed with the Securities and Exchange Commission on
October 23, 2006.
|
|
|
Exhibit
14.6
|
Compensation
Charter, incorporated by reference to Exhibit 14.6 to the Company’s Report
on Form 10-QSB, filed with the Securities and Exchange Commission on
October 23, 2006.
|
|
|
Exhibit
16.1
|
Letter
of Paritz and Company P.A. to the Commission, dated as of November 12,
2009.
|
|
|
Exhibit
21
|
|
List
of Subsidiaries.
|
36
|
Item 9.01:
|
Financial
Statements and Exhibits.
|
Financial
Statements
Those
financial statements contained in Item 13, above are incorporated into this Item
by reference thereto.
Exhibits
Those
Exhibits contained in Item 15, above are incorporated into this Item by
reference thereto.
# # #
37
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
|
CONO
ITALIANO, INC.
|
||
|
Date: November
12, 2009
|
By:
|
/s/ Mitchell Brown
|
|
Name: Mitchell
Brown
|
||
|
Title: Chief
Executive Officer
|
||
38