Attached files
| file | filename |
|---|---|
| EXCEL - IDEA: XBRL DOCUMENT - Attis Industries Inc. | Financial_Report.xls |
| EX-31.1 - EXHIBIT 31.1 - Attis Industries Inc. | ex31_1.htm |
| EX-32.1 - EXHIBIT 32.1 - Attis Industries Inc. | ex32_1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
| S | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended September 30, 2012
OR
| £ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______ to ________
Commission File Number 1-13984
BROOKLYN CHEESECAKE & DESSERTS COMPANY, INC.
(Exact name of registrant as specified in its charter)
| New York | 13-3832215 | |
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification Number) |
| 2070 Central Park Avenue 2nd Fl. Yonkers, NY 10710 |
| (Address of principal executive offices) |
| (914) 361-1420 |
| (Registrant’s telephone number including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the proceeding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes S No £
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes £ No £
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one): Large Accelerated filer £ Accelerated filer £ Non-accelerated filer (do not check if a smaller reporting company) £ Smaller reporting company S
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No S
As of November 13, 2012, there were 1,139,284 shares of the registrant’s common stock, par value $0.025 per share, outstanding.
INDEX
BROOKLYN CHEESECAKE & DESSERTS COMPANY, INC.
| September 30, 2012 | December 31, 2011 | |||||
| (Unaudited) | (1) | |||||
| ASSETS | ||||||
| Current assets: | ||||||
| Cash | $ | 1,078 | $ | 20 | ||
| Accounts receivable | 31,266 | 21,906 | ||||
| Total current assets | 32,344 | 21,926 | ||||
| Other assets: | ||||||
| Trademark, net of amortization | 26,625 | 31,125 | ||||
| Total other assets | 26,625 | 31,125 | ||||
| Total assets | $ | 58,969 | $ | 53,051 | ||
| LIABILITIES AND STOCKHOLDERS' (DEFICIT) | ||||||
| Current liabilities: | ||||||
| Accounts payable | $ | 15,350 | $ | 15,760 | ||
| Accrued expense | 11,600 | 13,103 | ||||
| Advances payable – stockholder | 63,323 | 38,922 | ||||
| Total current liabilities | 90,273 | 67,785 | ||||
| Stockholders’ (deficit): | ||||||
| Preferred stock $.001 par value, authorized 5,000,000 shares, none issued | — | — | ||||
| Common stock, $.025 par value, authorized 75,000,000 shares, issued and outstanding 1,139,284 shares | 28,482 | 28,482 | ||||
| Additional paid in capital | 13,585,672 | 13,585,672 | ||||
| Accumulated deficit | (13,645,458 | ) | (13,628,888 | ) | ||
| Total stockholders’ (deficit) | (31,304 | ) | (14,734 | ) | ||
| Total liabilities and stockholders’ (deficit) | $ | 58,969 | $ | 53,051 | ||
(1) Derived from Audited Financial Statements.
See notes to unaudited financial statements.
| 1 |
BROOKLYN CHEESECAKE & DESSERTS COMPANY, INC.
(UNAUDITED)
| Nine Months Ended September 30 | Three Months Ended September 30 | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Licensing fees | $ | 9,360 | $ | 7,000 | $ | 3,000 | $ | 2,000 | ||||||||
| Selling, general and administrative expenses | 25,930 | 23,730 | 7,041 | 7,556 | ||||||||||||
| Net loss | ($ | 16,570 | ) | ($ | 16,730 | ) | ($ | 4,041 | ) | ($ | 5,556 | ) | ||||
| Earnings per common share: | ||||||||||||||||
| Basic and diluted: | $ | (.01 | ) | $ | (.01 | ) | $ | (.00 | ) | $ | (.00 | ) | ||||
| Weighted average number of common shares outstanding | 1,139,284 | 1,139,284 | 1,139,284 | 1,139,284 | ||||||||||||
See notes to unaudited financial statements.
| 2 |
BROOKLYN CHEESECAKE & DESSERTS COMPANY, INC.
(UNAUDITED)
| Nine Months Ended September 30 | ||||||||
| 2012 | 2011 | |||||||
| Operating activities: | ||||||||
| Net (loss) | $ | (16,570 | ) | $ | (16,730 | ) | ||
| Amortization | 4,500 | 4,500 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (9,360 | ) | (7,000 | ) | ||||
| Accounts payable | (410 | ) | 3,236 | |||||
| Accrued expenses | (1,503 | ) | 831 | |||||
| Net cash used in operating activities | (23,343 | ) | (15,163 | ) | ||||
| Financing activities: | ||||||||
| Proceeds from advances payable – stockholder | 24,401 | 16,063 | ||||||
| Proceeds from cash advances, officer | — | — | ||||||
| Net cash provided by financing activities | 24,401 | 16,063 | ||||||
| Net increase in cash and cash equivalents | 1,058 | 900 | ||||||
| Cash and cash equivalents, beginning of period | 20 | 125 | ||||||
| Cash and cash equivalents, end of period | $ | 1,078 | $ | 1,025 | ||||
| Supplemental disclosures: | ||||||||
| Cash paid during the year for: | ||||||||
| Taxes: | $ | — | $ | — | ||||
| Interest: | $ | — | $ | — | ||||
See notes to unaudited financial statements.
| 3 |
BROOKLYN CHEESECAKE & DESSERTS COMPANY, INC.
SEPTEMBER 30, 2012
(UNAUDITED)
1. Basis of presentation:
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission on March 30, 2012.
The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results for the full fiscal year ending December 31, 2012.
Accounting standards have been issued or proposed by the FASB and other standards-setting bodies that are not expected to have a material impact on the financial statements for the period ending September 30, 2012 upon adoption.
2. Description of business and going concern:
The Company was a manufacturer of baking and confectionery products, which were sold to supermarkets, food distributors, educational institutions, restaurants, mail order and to the public. Although the Company sold its products throughout the United States, its main customer base was on the East Coast of the United States. The Company has now become a holder and licensor of intellectual property.
The accompanying financial statements are prepared assuming the Company will continue as a going concern. At September 30, 2012, the Company had an accumulated deficit of $13,645,458, and a working capital deficiency of $57,929. Additionally, for the nine months ended September 30, 2012, the Company incurred a net loss from operations of $16,570 and had negative cash flows from operations in the amount of $23,343. The ability of the Company to continue as a going concern is dependent upon increasing licensing fees and obtaining additional capital and financing. While the Company believes in the viability of its strategy to increase licensing fees and in its ability to raise additional funds, there can be no assurances to that effect.
3. Summary of significant accounting policies:
Cash and cash equivalents:
For the purpose of the statement of cash flows, the Company considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents.
Accounts receivable and allowances:
Accounts receivable are reported at net realizable value. Management considers the need for an allowance for doubtful accounts related to its accounts receivable that are deemed to have potential collectability issues. Management reviews its accounts receivable on a quarterly basis. The Company includes any receivables balances determined to be uncollectible along with a general reserve for doubtful accounts. No allowance was considered necessary at September 30, 2012.
Use of estimates:
The process of preparing financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts.
| 4 |
BROOKLYN CHEESECAKE & DESSERTS COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
(UNAUDITED)
3. Summary of significant accounting policies (continued):
Net (Loss) Income per Share:
The Company computes basic net (loss) income per share based on the weighted average common shares outstanding during the same period. Diluted net (loss) income per share adjusts the weighted average for potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock, which would then share in the earnings of the Company. At September 30, 2012, the Company had no such securities outstanding.
Revenue Recognition:
Income from licensing fees are recognized from the sale by our licensee of goods bearing the Brooklyn Cheesecake & Desserts Company, Inc. trademark. The Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.
Income Taxes:
Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax asset and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than changes in the tax law or rates. A valuation allowance is recorded when it is deemed more likely than not that a deferred tax asset will not be realized.
Impairment of Long-Lived Assets:
The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. The recoverability of assets held and used in operations is measured by a comparison of the carrying amount of the assets to the future net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Fair Value of Financial Instruments:
The Company’s financial instruments consist of, accounts receivable, accounts payable, accrued expenses, and notes payable. The carrying amounts of the financial instruments reported in the balance sheet approximate fair value based on the short-term maturities of these instruments.
Recent accounting pronouncements:
The Company has adopted all recently issued accounting pronouncements. The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.
| 5 |
BROOKLYN CHEESECAKE & DESSERTS COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
(UNAUDITED)
4. Trademark and licensing agreements:
On March 7, 2002, the Company purchased the rights to the trademarks Brooklyn Cheesecake Company, Inc. and Brooklyn Cheesecake and Desserts Company, Inc. and the related corporate logo in exchange for 300,000 shares of the Company's common stock, valued on the purchase date at $90,000. The trademark rights are being amortized on the straight-line basis over a fifteen-year term. Amortization expense was $4,500 and $4,500 for the nine months September 30, 2012 and 2011, respectively.
On March 28, 2006, the Company entered into a licensing agreement with its former Chairman and CEO, whereby a one percent of sales fee would be charged for the use of the Brooklyn Cheesecake & Desserts Company, Inc. trademarks. Licensing fees were $9,360 and $7,000 for the nine months ended September 30, 2012 and 2011, respectively. Licensing fees were $3,000 and $2,000 for the three months ended September 30, 2012 and 2011, respectively.
| September 30 | December 31 | |||||||
| 2012 | 2011 | |||||||
| Trademark | $ | 90,000 | $ | 90,000 | ||||
| Less: Accumulated Amortization | (63,375 | ) | (58,875 | ) | ||||
| Trademark, Net | $ | 26,625 | $ | 31,125 | ||||
The following is a schedule of future amortization of the trademark:
| 2012 | 6,000 | |||||
| 2013 | 6,000 | |||||
| 2014 | 6,000 | |||||
| 2015 | 6,000 | |||||
| Thereafter | 2, 625 | |||||
| $ | 26,625 |
5. Advances payable - stockholder:
During the period ended September 30, 2012, Ronald L. Schutté the former Chairman and CEO advanced $24,401 to the Company. The advances were used for operating expenses. Total advances through September 30, 2012 total $63,323. Total advances through September 30, 2011 totaled $31,826. These advances bear no interest and are payable on demand.
6. Business Concentrations
During the 9 months ended September 30, 2012 and 2011, the Company derived 100% of its revenues from a single customer. At September 30, 2012 and December 31, 2011, 100% of accounts receivable are due from a single customer.
7. Subsequent Events
The Company has evaluated all post balance sheet events for effect on the September 30, 2012 financial statements. No events or transactions require adjustment to, or disclosure in the financial statements.
| 6 |
Forward Looking Statements
This Quarterly Report on Form 10-Q includes 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. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” ”believe,” “estimate,” ”continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those in our other Securities and Exchange Commission filings, including our Annual Report on Form 10-K filed on March 30, 2012. The following discussion should be read in conjunction with our Financial Statements and related Notes thereto included elsewhere in this report.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
From March 2002 through March 2006, we were a manufacturer of baking and confectionary products. In March 2006, we entered into an Exchange Agreement pursuant to which we exchanged our baking equipment and other fixed assets and JM Specialties, Inc., our wholly owned subsidiary, for the satisfaction and assumption of approximately $1,145,000 of outstanding liabilities and obligations owed to Ronald L. Schutté, our former president and chief executive officer. We retained our trademarks and now license these trademarks to a New Jersey corporation formed by Mr. Schutté to continue the baking operations that were transferred to him pursuant to the Exchange Agreement.
We presently do not have sufficient cash to implement our business plan.
Although we are hopeful that licensing fees will increase in the future and be sufficient to pay related expenses, we will also look for additional opportunities, such as joint ventures, partnerships, strategic alliances or business combinations. The Company is not currently considering any such opportunities
On October 11, 2010, one shareholder owning 6,459,513 shares of our Common Stock, or approximately 81% of the issued and outstanding shares, consented in writing to a one (1) for seven (7) reverse split of the shares of the Company’s issued and outstanding Common Stock and to an increase in the authorized shares of the Company’s capital stock. For accounting purposes the effect of the reverse split and increase in authorized have been retroactively reflected in the financial statements included in this report.
The following discussion and analysis should be read in conjunction with the financial statements and the related notes thereto included in this Quarterly Report on Form 10-Q.
Critical Accounting Policies
Revenue Recognition:
Income from licensing fees are recognized from the sale by our licensee of goods bearing the Brooklyn Cheesecake & Desserts Company, Inc. trademark. The Company records revenue when persuasive evidence of an arrangement exists, services have been rendered or product delivery has occurred, the sales price to the customer is fixed or determinable, and collectability is reasonably assured.
| 7 |
Results of Operations
Nine and Three Months Ended September 30, 2012 Compared to the Nine and Three Months Ended September 30, 2011
Licensing fees aggregated $9,360 and $7,000 for the nine months ended September 30, 2012 and 2011, respectively. The increase of $2,360 or 33% was due to an increase in sales of our trademark products. Licensing fees for the three months ended September 30, 2012 as compared to September 30, 2011 was $3,000 and $2,000 respectively. The increase of $1,000 or 50% was due to an increase in sales of our trademark products.
Selling, general and administrative expenses totaled $25,930 and $23,730 for the nine months ended September 30, 2012 and 2011, respectively. The increase of $2,200 or 9% was the result of higher public expense. Selling, general and administrative expenses for the three months ended September 30, 2012 decreased to $7,041 from $7,556 for the three months ended September 30, 2011. This is a decrease of $515 or 6%. This is a result of lower public expense during the quarter.
Liquidity and Capital Resources
Since inception, our only source of working capital has been the $8,455,000 received from the sale of our securities.
As of September 30, 2012, we had negative working capital of $57,929 as compared to negative working capital of $45,859 at December 31, 2011.
Net Cash Used in Operating Activities during the nine months ended September 30, 2012 of $23,343 was due to our net loss of $16,570 and amortization expense of $4,500. This was offset by an increase in accounts receivable of $9,360, a decrease in accounts payable of $410, and a decrease in accrued expenses of $1,503.
Net Cash Used in Operating Activities during the nine months ended September 30, 2011 of $15,163 was due to our net loss of $16,730 and amortization expense of $4,500. This was offset by an increase in accounts receivable of $7,000, an increase in accounts payable of $3,236, and an increase in accrued expenses of $831.
Net Cash Provided by Financing Activities during the nine months ended September 30, 2012 of $24,401 was due to cash advances from a stockholder , our former CEO.
Net Cash Provided by Financing Activities during the nine months ended September 30, 2011 of $16,063 was due to cash advances from a stockholder , our former CEO.
Effective April 29, 2010, we entered into a Debt Conversion Agreement with each of Mr. Ronald L.
Schutte, our former Chairman and Chief Executive Officer, and Mr. Anthony J. Merante our current Chairman and Chief Executive Officer pursuant to which we eliminated approximately $934,482 of our indebtedness in exchange for the forgiveness of $23,232 owed to us and the issuance of an aggregate of 7,290,000 shares of our common stock. These transactions helped reduce our negative working capital which we hope will increase our ability to raise the capital needed to fully implement our business plan.
Pursuant to the Debt Conversion Agreement that we entered into with Mr. Schutte: (i) we forgave accounts receivable for licensing fees due from the baking company owned by Mr. Schutte of $23,232 in exchange for a $23,232 reduction of the principal balance of the note payable to Mr. Schutte in the original principal amount of $815,000, (ii) Mr. Schutte forgave and agreed to permanently forbear on collection of the accrued but unpaid interest of $431,659 on his note payable which was recorded as a contribution to capital, and (iii) we converted the remaining principal balance of $791,768 of Mr. Schutte’s promissory note by issuing 6,334,144 shares of common stock to Mr. Schutte (the “Schutte Conversion Shares”).
Pursuant to the Debt Conversion Agreement that we entered into with Mr. Merante, we converted the outstanding principal balance of his indebtedness of $119,482 by issuing 955,856 shares of common stock to Mr. Merante (the “Merante Conversion Shares” and, collectively with the Schutte Conversion Shares, the “Conversion Shares”).
| 8 |
Inflation and Seasonality
Licensing revenue will vary since it is tied to peak baking seasons. Revenues are generally higher during holiday seasons such as Thanksgiving, Christmas, Jewish New Year, Easter and Passover than they are during other times of the year.
Off-Balance Sheet Arrangements
There were no off-balance sheet arrangements during the three and nine months ended September 30, 2012 that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our interests.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
This disclosure is not required for a smaller reporting company.
Item 4 Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
As of September 30, 2012, we carried out an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) under the supervision and with the participation of our management, including Anthony J. Merante, our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, Mr. Merante concluded that our disclosure controls and procedures are effective at a reasonable assurance level to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure.
CHANGES IN INTERNAL CONTROLS
During the quarter ended September 30, 2012, there was no change in the issuer’s internal control over financial reporting that has materially affected, or is reasonable likely to materially affect, the issuer’s internal control over financial reporting.
LIMITATIONS ON THE EFFECTIVENESS OF CONTROLS.
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and not be detected. The Company conducts periodic evaluations of its internal controls to enhance, where necessary, its procedures and controls.
| 9 |
From time to time we may be a party to legal proceedings occurring in the ordinary course of business. We are not currently involved in any legal proceedings.
This disclosure is not required for a smaller reporting company.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. [Removed and Reserved]
None.
| 10 |
(a) Exhibits
| 31.1 | Certification dated November 13, 2012 pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes Oxley-Act of 2002 by Anthony J. Merante, Chairman, President, Chief Executive Officer, and Chief Financial Officer. | ||
| 32.1 | Certification dated November 13, 2012 pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 made by Anthony J. Merante, Chairman, President, Chief Executive Officer, and Chief Financial Officer. |
| 11 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Brooklyn Cheesecake & Desserts Company, Inc.
| By: /s/Anthony J. Merante | |
| Chairman, President, Chief Executive Officer and Chief Financial Officer | |
| (principal financial officer and principal accounting officer) |
Date: November 13, 2012
12