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EX-32.1 - CERTIFICATION - Tootie Pie Company, Inc. | toot_ex321.htm |
EX-31.1 - CERTIFICATION - Tootie Pie Company, Inc. | toot_ex311.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended December 31, 2010
or
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _______ to _______
TOOTIE PIE COMPANY, INC.
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(Exact name of registrant as specified in charter)
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NV
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333-135702
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72-1602919
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(State or other jurisdiction
of incorporation or organization)
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(Commission File Number)
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(IRS Employer
Identification No.)
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129 Industrial Drive, Boerne, TX 78006
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(Address of principal executive offices) (Zip Code)
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(210) 737-6600
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(Registrant’s telephone number, including area code)
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N/A
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(Former name, former address and former fiscal year, if changed since last report)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. T 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.
Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o (Do not check if a smaller reporting company)
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Smaller reporting company þ
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). £ Yes T No
As of February 12, 2011, 13,918,092 shares of the Issuer’s common stock, $0.001 par value, were outstanding.
TOOTIE PIE COMPANY, INC.
INDEX
PART I – FINANCIAL INFORMATION
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Page
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||||
Item 1.
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Financial Statements (Unaudited)
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||||
Balance Sheets as of December 31, 2010 and March 31, 2010
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3 | ||||
Statements of Operations for the three and nine months ended December 31, 2010 and 2009
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4 | ||||
Statements of Cash Flows for the nine months ended December 31, 2010 and 2009
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5 | ||||
Notes to Financial Statements
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6 | ||||
Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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8 | |||
Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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13 | |||
Item 4.
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Controls and Procedures
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13 | |||
PART II – OTHER INFORMATION
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|||||
Item 1.
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Legal Proceedings
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14 | |||
Item 1A.
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Risk Factors
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||||
Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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14 | |||
Item 3.
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Defaults Upon Senior Securities
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14 | |||
Item 4.
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Removed and Reserved
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14 | |||
Item 5.
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Other Information
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14 | |||
Item 6.
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Exhibits
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15 |
2
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TOOTIE PIE COMPANY, INC.
BALANCE SHEETS
December 31,
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March 31,
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|||||||
2010
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2010
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|||||||
(unaudited)
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||||||||
ASSETS
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||||||||
Current Assets:
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||||||||
Cash and equivalents
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$ | 987,568 | $ | 47,056 | ||||
Accounts receivable, trade
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132,349 | 38,857 | ||||||
Inventory
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94,389 | 181,869 | ||||||
Other current assets
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94,654 | 11,537 | ||||||
Total current assets
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1,308,960 | 279,319 | ||||||
Fixed Assets:
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||||||||
Furniture and equipment
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535,919 | 417,242 | ||||||
Leasehold improvements
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147,996 | 34,318 | ||||||
Building
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7,000 | 7,000 | ||||||
Construction in process
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12,260 | -- | ||||||
Total fixed assets
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703,175 | 458,560 | ||||||
Less accumulated depreciation
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(243,750 | ) | (186,863 | ) | ||||
Net fixed assets
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459,425 | 271,697 | ||||||
Other Assets:
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||||||||
Intangible assets, net
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45,476 | 65,940 | ||||||
Deposits and other
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25,089 | 5,410 | ||||||
Total other assets
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70,565 | 71,350 | ||||||
Total Assets
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$ | 1,838,950 | $ | 622,366 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
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||||||||
Current Liabilities:
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||||||||
Accounts payable, trade
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$ | 314,845 | $ | 32,064 | ||||
Accounts payable, employees
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7,630 | 3,517 | ||||||
Accounts payable, related party
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6,266 | -- | ||||||
Deferred revenue
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18,927 | 2,216 | ||||||
Accrued expenses
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75,827 | 43,155 | ||||||
Long-term debt, current portion
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106,762 | 72,500 | ||||||
Long-term debt, net of current portion, related party
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25,000 | -- | ||||||
Total current liabilities
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555,257 | 153,452 | ||||||
Long-term Debt, net of current portion
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21,442 | -- | ||||||
Stockholders’ Equity:
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||||||||
Preferred stock, $0.001 par value; authorized 100,000 shares, none issued or outstanding
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-- | -- | ||||||
Common stock, $0.001 par value; authorized 99,900,000 shares, 13,631,592 and
9,512,462 issued and outstanding
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13,632 | 9,512 | ||||||
Additional paid-in-capital
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4,140,021 | 2,883,848 | ||||||
Retained earnings (deficit)
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(2,891,402 | ) | (2,424,446 | ) | ||||
Total stockholders’ equity
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1,262,251 | 468,914 | ||||||
Total Liabilities and Stockholders’ Equity
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$ | 1,838,950 | $ | 622,366 |
See Notes to Interim Financial Statements
3
TOOTIE PIE COMPANY, INC.
STATEMENTS OF OPERATIONS
Three Months Ended
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Nine Months Ended
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December 31,
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December 31,
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|||||||||||||||
2010
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2009
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2010
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2009
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(unaudited)
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(unaudited)
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(unaudited)
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(unaudited)
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|||||||||||||
Sales, net
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$ | 1,061,215 | $ | 910,837 | $ | 1,711,197 | $ | 1,408,864 | ||||||||
Cost of goods sold
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356,419 | 271,301 | 624,381 | 469,706 | ||||||||||||
Gross profit
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704,796 | 639,536 | 1,086,816 | 939,158 | ||||||||||||
Operating Expenses:
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||||||||||||||||
General and administrative expense
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186,500 | 145,547 | 542,478 | 384,777 | ||||||||||||
Selling expense
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556,435 | 464,218 | 1,012,136 | 803,025 | ||||||||||||
Total operating expenses
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742,935 | 609,765 | 1,554,614 | 1,187,802 | ||||||||||||
Operating Income (Loss)
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(38,139 | ) | 29,771 | (467,798 | ) | (248,644 | ) | |||||||||
Other Income (Expenses):
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||||||||||||||||
Interest income
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-- | -- | -- | -- | ||||||||||||
Other income
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-- | -- | 1,750 | -- | ||||||||||||
Total other income
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-- | -- | 1,750 | -- | ||||||||||||
Income (Loss) before income taxes
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(38,139 | ) | 29,771 | (466,048 | ) | (248,644 | ) | |||||||||
Income taxes
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375 | 450 | 907 | 1,350 | ||||||||||||
Net Income (Loss)
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$ | (38,514 | ) | $ | 29,321 | $ | (466,955 | ) | $ | (249,994 | ) | |||||
Earnings (Loss) Per Share
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Basic and diluted loss per share
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$ | 0.00 | $ | 0.00 | $ | (0.04 | ) | $ | (0.03 | ) | ||||||
Weighted average common shares:
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||||||||||||||||
Basic
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12,583,983 | 9,471,603 | 11,175,433 | 9,235,162 | ||||||||||||
Diluted
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12,583,983 | 9,471,603 | 11,175,433 | 9,235,162 |
See Notes to Interim Financial Statements
4
TOOTIE PIE COMPANY, INC.
STATEMENTS OF CASH FLOWS
Nine Months Ended
December 31,
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||||||||
2010
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2009
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(unaudited)
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(unaudited)
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|||||||
Operating Activities
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||||||||
Net loss
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$
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(466,955)
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$
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(249,994)
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||||
Adjustments to reconcile net loss to net cash provided (used) by operating activities:
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Depreciation
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20,464
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44,538
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Amortization
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56,888
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20,464
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Non-cash compensation expense
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--
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16,173
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Non-cash expense for services
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154,713
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--
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Changes in operating assets and liabilities:
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||||||||
Accounts receivable
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(97,669)
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(70,186)
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Inventory
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87,480
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134,766
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Other current assets
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(98,619)
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9,422
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Accounts payable and accrued expenses
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323,615
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114,266
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Deferred revenue
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18,927
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0
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Net Cash Provided (Used) by Operating Activities
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(1,156)
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19,449
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Investing Activities
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Purchases of fixed assets
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(189,036)
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--
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Net Cash (Used) by Investing Activities
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(189,036)
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--
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Financing Activities
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||||||||
Borrowings on long-term debt
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57,957
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--
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Borrowings on long-term debt, related party
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25,000
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--
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Repayments on long-term debt
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(2,253)
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(22,500)
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Issuances of common stock, net of offering costs
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1,050,000
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50,000
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||||||
Net Cash Provided by Financing Activities
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1,130,704
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27,500
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Net Change in Cash
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940,512
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46,949
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Cash at beginning of period
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47,056
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183,859
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Cash at End of Period
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$
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987,568
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$
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230,808
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Supplemental Disclosures
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Common stock issued for fixed assets
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60,560
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45,000
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Note payable issued for fixed assets
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7,957
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110,000
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See Notes to Interim Financial Statements
5
TOOTIE PIE COMPANY, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION
The accompanying unaudited financial statements of Tootie Pie Company, Inc. (the “Company”) have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the accompanying financial statements reflect all adjustments of a normal recurring nature considered necessary to fairly present the Company’s financial position, results of operations, and cash flows for such periods. The accompanying interim financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2010. Results of operations for interim periods are not necessarily indicative of results that may be expected for any other interim periods or the full fiscal year. Certain insignificant amounts as of and for year ended March 31, 2010 have been reclassified for comparative purposes to the current presentation.
The preparation of financial statements in conformity with U.S. 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.
NOTE 2 – INVENTORIES
Inventories consist of the following:
December 31,
2010
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March 31,
2010
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Raw materials
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$
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26,890
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$
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62,251
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Packaging materials
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11,500
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19,208
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Finished goods
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55,999
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100,410
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Total inventories
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$
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94,389
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$
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181,869
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NOTE 3 – STOCK-BASED COMPENSATION
The Company measures and recognizes compensation expense for all share-based payment awards of common stock options based on estimated fair values using the Black-Scholes option pricing model. The Company recognized stock-based compensation expense in the quarter ended December 31, 2010 and 2009 of $0 and $9,874, respectively.
NOTE 4 – INCOME TAXES
The Company does not have any unrecognized income tax benefits at December 31, 2010 or December 31, 2009. If applicable, the Company would recognize interest and penalties related to uncertain tax positions in interest expense. As of December 31, 2010, the Company had no accrued interest or penalties.
As of December 31, 2010, the tax years ended March 31, 2007 through March 31, 2010 remain subject to examination by tax authorities.
The Company has incurred net operating losses since its inception of approximately $2,440,000 resulting in a deferred tax asset of approximately $830,000 at December 31, 2010. In assessing the reliability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred tax asset to warrant the application of a full valuation allowance as of December 31, 2010 and March 31, 2010.
6
NOTE 5 – EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share are computed on the basis of the weighted average number of common shares outstanding during each period. Diluted earnings per share are computed on the basis of the weighted average number of common shares and dilutive securities outstanding. Dilutive securities having an anti-dilutive effect on diluted earnings per share are excluded from the calculation.
The following reconciles the components of the earnings (loss) per share (EPS) computation:
Income (Loss)
Numerator
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Shares
Denominator
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Per Share Amount
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||||||||||
Three Months Ended December 31, 2010
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Basic EPS:
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||||||||||||
Net income
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$ | (38,514 | ) | 12,583,983 | $ | 0.00 | ||||||
Effect of dilutive options
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-0- | -0- | -0- | |||||||||
Dilutive EPS
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$ | (38,514 | ) | 12,583,983 | $ | 0.00 | ||||||
Three Months Ended December 31, 2009
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Basic EPS:
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||||||||||||
Net income
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$ | 29,321 | 9,471,603 | $ | 0.00 | |||||||
Effect of dilutive options
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-0- | -0- | -0- | |||||||||
Dilutive EPS
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$ | 29,321 | 9,471,603 | $ | 0.00 |
Nine Months Ended December 31, 2010
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||||||||||||
Basic EPS:
|
||||||||||||
Net (loss)
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$ | (466,955 | ) | 11,175,433 | $ | (0.04 | ) | |||||
Effect of dilutive options
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-0- | -0- | -0- | |||||||||
Dilutive EPS
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$ | (466,955 | ) | 11,175,433 | $ | (0.04 | ) | |||||
Nine Months Ended December 31, 2009
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||||||||||||
Basic EPS:
|
||||||||||||
Net (loss)
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$ | (249,994 | ) | 9,235,162 | $ | (0.03 | ) | |||||
Effect of dilutive options
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-0- | -0- | -0- | |||||||||
Dilutive EPS
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$ | (249,994 | ) | 9,235,162 | $ | (0.03 | ) |
7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements Disclaimer
This report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including the risks described in this report, our Annual Report on Form 10-K and other reports we file with the Securities and Exchange Commission. In general, such statements are identified by the use of forward-looking words or phrases including, but not limited to “intended,” “will,” “should,” “may,” “expects,” “expected,” “anticipates,” and “anticipated” or the negative thereof or variations thereon or similar terminology. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made. We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.
This discussion and analysis should be read in conjunction with the unaudited interim financial statements and the notes thereto included in this report, and our Annual Report on Form 10-K for the fiscal year ended March 31, 2010.
Background
On June 16, 2005, we incorporated in the State of Nevada. On September 9, 2005, we purchased the rights, recipes, customer lists, and certain equipment of a sole proprietor located in Medina, Texas for $50,000 in cash and the issuance of 600,000 shares of common stock valued at $150,000. Our fiscal year end is March 31.
Business Overview
We manufacture, market and sell “high quality” pies. We have three sales channels: retail, corporate and wholesale that require different “value added” marketing strategies to address each customer base.
Our retail market is comprised of individual consumers through in-store sales at our Boerne storefront and Tootie Pie Gourmet Café locations, orders via telephone and internet orders from our website: www.tootiepieco.com. We do not intend for information on our website to be incorporated into this report.
We currently own and operate five Tootie Pie Gourmet Cafes. Our cafes offer a light menu of coffee, bagels, pastries, soups and sandwiches. We also sell whole pies and pies by the slice. We operate our cafes at the following locations:
·
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16615 Huebner Road, San Antonio, TX
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·
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2339 Evans, San Antonio, TX
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·
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5130 Broadway, San Antonio, TX
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·
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339 E. Main St, Fredericksburg, TX
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·
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6959 Lebanon Road, Frisco, TX
|
Our corporate market is comprised of businesses that purchase our pies for gifts, events and/or personal use. Our corporate sales program provides a convenient and cost effective way for our corporate clients to promote their company through customer and employee appreciation programs. Our corporate customers range in size from small businesses to large corporations. We believe this market will continue to play a key role in our future growth because our current corporate customers send our pies to their contacts and employees. We believe that once those end-recipients sample the quality of our pies, they may become our future customers.
Our wholesale market is comprised of regional and national broad-line foodservice distributors who purchase our products and then resell them to their customers. We sell our pies through the following distributors:
·
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Ben E. Keith Food Services San Antonio
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·
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Ben E. Keith Food Services Dallas/Fort Worth
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·
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Ben E. Keith Food Services Oklahoma
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·
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Ben E. Keith Food Services Amarillo
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·
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Ben E. Keith Food Services Albuquerque
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·
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Ben E. Keith Food Services Little Rock
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·
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Sysco Food Services of San Antonio
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·
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Sysco Food Services of Austin
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·
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Sysco Food Services of Houston
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8
·
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Sysco Food Services of Dallas
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·
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Sysco Food Services of Atlanta
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·
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Sysco Food Services of St. Louis
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·
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Sysco Food Services of Jackson
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·
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Sysco Food Services of East Texas
|
·
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U.S. Foodservice – Austin
|
·
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Performance Food Group – Temple
|
·
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Martin Preferred Foods – Houston
|
·
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Cheney Brothers – Florida
|
·
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Reinhart Food Service
|
·
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Kehe Food Distributor
|
Ben E. Keith Food Services of San Antonio, Dallas/Fort Worth, Oklahoma, Amarillo, Albuquerque and Little Rock are part of Ben E. Keith Food Services, a multi-state foodservice distributor. Each location covers the following territories:
|
·
|
Ben E. Keith Food Services of San Antonio sells to customers located in the central and south Texas markets.
|
|
·
|
Ben E. Keith Food Services of Dallas/Fort Worth sells to customers located in west Texas, north Texas, east Texas and parts of northern Louisiana.
|
|
·
|
Ben E. Keith Food Services of San Antonio and Dallas/Fort Worth both service the Houston, Texas market.
|
|
·
|
Ben E. Keith Food Services of Oklahoma sells to customers located in Oklahoma, eastern Kansas and western Missouri.
|
|
·
|
Ben E. Keith Food Services of Amarillo sells to customers located in the Texas panhandle, eastern New Mexico, parts of western Oklahoma and western Kansas.
|
|
·
|
Ben E. Keith Food Services of Albuquerque sells to customers located in New Mexico and southeastern Colorado.
|
|
·
|
Ben E. Keith Food Services of Little Rock sells to customers located in Arkansas, southern Missouri, western Tennessee, northwest Mississippi and Louisiana.
|
Sysco Food Services of San Antonio, Austin, Houston, Dallas, East Texas, Atlanta, St. Louis and Jackson are part of Sysco Corporation, a national foodservice distributor. Each location covers the following territories:
|
·
|
Sysco Food Services of San Antonio sells to customers located in the south Texas market.
|
|
·
|
Sysco Food Services of Austin sells to customers located in the central Texas market.
|
|
·
|
Sysco Food Services of Houston and East Texas sell to customers located in the east Texas market.
|
|
·
|
Sysco Food Services of Dallas sells to customers located in the Dallas/Ft. Worth market.
|
|
·
|
Sysco Food Services of Atlanta sells to customers in the greater Atlanta market.
|
|
·
|
Sysco Food Services of St. Louis sells to customers in the greater St. Louis market.
|
|
·
|
Sysco Food Services of Jackson sells to customers in Mississippi and surrounding markets.
|
U.S. Foodservice – Austin is part of U.S. Foodservice Corporation, a national foodservice distributor. U.S. Foodservice – Austin sells to customers in the central and south Texas.
Performance Food Group – Temple is part of Performance Food Group, a multi-state broad-line foodservice distributor as well as a national account foodservice distributor. Performance Food Group – Temple sells to customers in the central Texas market.
Martin Preferred Foods is a foodservice distributor. Martin Preferred Foods is based in Houston, Texas and services the Texas market. Martin is a member of Unipro. Unipro is the largest foodservice purchasing group that allows its independent distributors to compete with the major grocery distribution companies in the state of Texas.
Cheney Brothers Inc. is a food service distributor. They market to customers in Florida from two locations in Riviera and Ocala.
Reinhart is a multi-state food service distributor that has locations primarily in the Eastern United States. Reinhart mostly serves the Oklahoma market for our Company.
Kehe is a food distributor for specialty food items to more than 15,000 retail outlets in 49 states, Mexico, and the Caribbean.
9
The distributors purchase our products in volume and then sell and deliver our products to their customers. The distributors’ customers are referred to as “end-users” and consist of restaurants, hotels, hospitals, schools, convention centers and caterers. The size of each distributor’s customers varies and ranges from local to regional and national companies.
A key component of our wholesale business is actively marketing our products to our distributors’ sales forces and to their respective end-users. We accomplish this by hiring sales personnel, whose primary responsibility is to educate the distributors’ sales forces about our products and assist them in selling our products, including going on sales calls with them or making sales calls on their behalf. Part of our plan also includes providing our sales support to our distributors at a level that separates us from our competitors.
In the past, we have retained the services of a foodservice broker who was responsible for soliciting orders, introducing new products at our request and maintaining contact with certain accounts. In addition, the broker transmitted information to us related to competitive pricing, promotion and advertising bearing on our products and attends trade shows relating to the food trade within its territory. We do not currently have such a relationship and intend to monitor our needs in this regard. We may, however, utilize food broker services as we consider beneficial to our Company in the future.
We manage our production of finished inventory by maintaining an established minimum level of inventory by product type. We believe this provides us the necessary lead time to produce inventory based on demand. To manage our inventory for the seasonality of our retail, corporate, and wholesale sales, we analyze our current production capacity and based on this capacity and projected sales volumes, we build up our inventory of pies to meet the anticipated demand. In the event we over-produce inventory for the holiday season, we intend to reduce inventory production and sell the excess inventory to wholesale and retail customers after the holiday season.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
General: This Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to the reported amounts of revenues and expenses, bad debt, investments, intangible assets, income taxes, and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions or conditions. We consider the following accounting policies to be critical because the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change or because the impact of the estimates and assumptions on financial condition or operating performance is material.
Revenue Recognition: Revenue is recognized when the following four criteria have been met: (1) the product has been shipped and we have no significant remaining obligations; (2) persuasive evidence of an arrangement exists; (3) the price to the buyer is fixed or determinable; and (4) collection is probable. Our products may be shipped from either production or third party storage facilities to customers. Deductions from sales for discounts are recorded as reductions of revenues and are provided for at the time of initial sale of product.
Valuation of Long-Lived Assets: We periodically review, on at least an annual basis, the carrying value of intangible assets and other long-lived assets, or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. To the extent the fair value of intangible assets and long-lived assets, determined based upon the estimated future cash flows attributable to the assets less estimated future cash outflows, are less than the carrying amount, an impairment loss is recognized.
Federal Income Taxes: We follow the liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences. Accordingly, deferred tax assets and liabilities are determined based on the temporary differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse.
Share-Based Compensation: We recognize compensation cost relating to share-based payments, including grants of employee stock options based on the estimated fair value of the equity or liability instruments issued using the Black-Scholes option pricing model. We measure the cost of services received in exchange for stock options based on the grant-date fair value of the award and recognize the cost over the requisite service period.
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New Accounting Standards
No new accounting standards have been issued, and are not yet effective, which are expected to have significant impact to our financial position or results of operations.
Results of Operations
Revenues:
Our revenues are principally derived from selling our pies to retail, corporate and wholesale markets. Revenues for the quarter ended December 31, 2010 increased 17% to $1,061,215 from $910,837 for the quarter ended December 31, 2009. Revenues for the nine months ended December 31, 2010 increased 21% to $1,711,197 from $1,408,864 for the nine months ended December 31, 2009. The overall increase in revenues comes primarily from two sources: sales from our Tootie Pie Gourmet Cafes, two of which were open for the entire reporting period and three new Cafes, which were opened during the period; as well as an increase in corporate and internet sales. Our wholesale business remained virtually unchanged.
For periods reported below, our customers were in the following categories:
Category
|
Three month
period ended
December 31,
2010
|
Three month
period ended
December 31,
2009
|
Nine month
period ended
December 31,
2010
|
Nine month
period ended
December 31,
2009
|
||||||||
Retail
|
23% | 23% | 20% | 20% | ||||||||
Corporate
|
24% | 20% | 16% | 14% | ||||||||
Wholesale
|
53% | 57% | 64% | 66% | ||||||||
Totals
|
100% | 100% | 100% | 100% |
Due to the seasonal nature of our business, we expect there will be large fluctuations in the percentage breakdown between the categories of our business reported at the various reporting periods. Although our retail and corporate customers purchase our pies throughout the year, the majority of such sales are during November and December which is in our third fiscal quarter. Sales to our wholesale customers also experience seasonal fluctuations with a large portion of our wholesale revenue recorded during our third fiscal quarter. Specifically, 59% of our retail revenue, 89% of our corporate revenue and 43% of our wholesale revenue for the fiscal year ended March 31, 2010 was recorded in our third fiscal quarter.
As of December 31, 2010, our three largest wholesale customers were Kehe Food Distributor, Ben E. Keith Food Services and Sysco Corporation. For the quarter ended December 31, 2010, Kehe Food Distributor, Ben E. Keith Food Services and Sysco Corporation combined for 48% of our overall revenue, 19%, 17% and 12%, respectively.
Cost of Sales:
Cost of sales generally includes raw materials, direct labor, cooking and cleaning supplies and factory overhead. Cost of sales was $356,419 and $271,301 for the quarters ended December 31, 2010 and December 31, 2009, respectively. The increase from the prior year quarter was primarily due to the overall increase in sales from the prior year quarter, as well as some inflationary increases in the cost of some raw materials.
Gross Margin:
Gross margin after depreciation was 66% of net sales for the quarter ended December 31, 2010 compared to 70% for the quarter ended December 31, 2009. We expect the gross margin percentage to fluctuate as we refine our manufacturing process.
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Selling, General and Administrative Expenses:
Selling, general and administrative expenses increased to $742,935 for the quarter ended December 31, 2010 from $609,765 for the quarter ended December 31, 2009. Selling, general and administrative expenses for the nine months ended December 31, 2010 increased to $1,554,614 from $1,187,802 for the nine months ended December 31, 2009. The increase in selling and general and administrative expenses from the prior year periods was principally due to an increase in personnel required to open, manage and operate our three newest Gourmet Café locations, some shipping related increases due to an increase in our corporate and internet sales, as well as some increased promotional activities associated with our wholesale grocery business.
Liquidity and Capital Resources
We believe our current working capital will be adequate to fund our operations for the next twelve months, based on a conservative revenue forecast. In the event our current working capital is not adequate to fund our operations and growth and we do not receive any additional capital or financing, we may need to seek alternative sources of working capital. Potential sources of such working capital could include senior debt facilities, new lines of credit or additional sales of our securities. There is a risk that such additional financing may not be available, or may not be available on acceptable terms, and the inability to obtain additional financing or generate sufficient cash from operations could require us to reduce or eliminate expenditures for capital equipment, production, or marketing of our products, or otherwise curtail or discontinue our operations, which could have a material adverse effect on our business, financial condition and results of operations.
At December 31, 2010, we had $987,568 of cash and cash equivalents, compared to $47,056 of cash and cash equivalents at March 31, 2010. Our current assets at December 31, 2010 were $1,308,960 compared to $279,319 at March 31, 2010. Our current liabilities at December 31, 2010 were $555,257 compared to $153,452 at March 31, 2010.
Net cash used in operating activities was $1,156 for the nine month period ended December 31, 2010, compared to $19,449 of net cash provided for the nine month period ended December 31, 2009. The change in cash provided (used) in operating activities was not significant.
Net cash used in investing activities was $189,036 for the nine month period ended December 31, 2010 and $0 for the nine month period ended December 31, 2009. The increase in cash used for investing activities was a direct result of our recent purchases of assets for use in three new Gourmet Cafes..
Net cash provided by financing activities of $1,130,704 for the nine month period ended December 31, 2010 represents proceeds from the issuance of common stock as well as borrowings in notes payable, net of repayments. During the current fiscal year, we raised $1,050,000 from issuances of common stock, compared to $50,000 in the prior year. Borrowings and repayments of debt have been insignificant.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a Smaller Reporting Company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures:
Our management evaluated, with the participation of our Chief Executive Officer, who is also our Interim Chief Financial Officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report on Form 10-Q. Based on that evaluation, our Chief Executive Officer/Interim Chief Financial Officer concluded that our disclosure controls and procedures as of September 30, 2009 are effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act (i) are recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) are accumulated and communicated to our management, including our Chief Executive Officer/Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required reasonable assurance that such information is accumulated and communicated to our management. Our disclosure controls and procedures are designed to provide reasonable assurance that such information is accumulated and communicated to our management. Our disclosure controls and procedures include components of our internal control over financial reporting. Management's assessment of the effectiveness of our internal control over financial reporting is expressed at the level of reasonable assurance that the control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met.
Changes in Internal Control over Financial Reporting:
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We may be involved from time to time in ordinary litigation, negotiation and settlement matters that will not have a material effect on our operations or finances. We are not aware of any pending or threatened litigation against us or our officers and directors in their capacity as such that could have a material impact on our operations or finances.
ITEM 1A. RISK FACTORS
There have been no material changes from risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended March 31, 2010.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We did not issue any unregistered securities in the quarter ending December 31, 2010 except as disclosed in our prior filing on Form 8-K filed with the SEC on December 15, 2010.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
During the quarter ended December 31, 2010, we did not have any defaults on senior debt securities.
ITEM 4. REMOVED AND RESERVED
ITEM 5. OTHER INFORMATION
None.
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ITEM 6. EXHIBITS
Exhibit
Number
|
Description |
3.1
|
Articles of Incorporation (included as Exhibit 3.1 to the Form SB-2 filed July 11, 2006, and incorporated herein by reference).
|
3.2
|
By-laws (included as Exhibit 3.2 to the Form SB-2 filed July 11, 2006, and incorporated herein by reference).
|
4.1
|
Corrected Form of Class A Warrant (included as Exhibit 4.1 to the Form SB-2/A filed August 24, 2006 and incorporated herein by reference).
|
4.2
|
Corrected Form of Class B Warrant (included as Exhibit 4.2 to the Form SB-2/A filed August 24, 2006 and incorporated herein by reference).
|
10.1
|
Commercial Lease between the Company and Jim and Betty Wade, dated July 20, 2005 (included as Exhibit 10.1 to the Form SB-2 filed July 11, 2006 and incorporated herein by reference).
|
10.2
|
Vendor Agreement between the Company and U.S. Foodservice, Inc., dated July 19, 2006 (included as Exhibit 10.3 to the Form SB-2/A filed October 18, 2006 and incorporated herein by reference).
|
10.3
|
Hold Harmless Agreement and Guaranty/Warranty of Product between the Company and Sysco Corporation, dated July 19, 2006 (included as Exhibit 10.4 to the Form SB-2/A filed October 18, 2006 and incorporated herein by reference).
|
10.4
|
Non-Compete Agreement between the Company and Bobbie Keese, dated September 9, 2005 (included as Exhibit 10.5 to the Form SB-2/A filed October 18, 2006 and incorporated herein by reference).
|
10.5
|
Non-Compete Agreement between the Company and Ruby Lorraine “Tootie” Feagan, dated September 9, 2005 (included as exhibit 10.6 to the Form SB-2/A filed October 18, 2006 and incorporated herein by reference).
|
10.6
|
Final Agreement between the Company and Ruby Lorraine “Tootie” Feagan, dated November 6, 2006 (included as Exhibit 10.7 to the Form SB-2/A filed November 9, 2006 and incorporated herein by reference).
|
10.7
|
Full Service Broker Agreement between the Company and Hanks Brokerage, dated November 7, 2006 (included as Exhibit 10.8 to the Form SB-2/A filed November 9, 2006 and incorporated herein by reference).
|
10.8
|
Stock Option Agreement between the Company and Don Merrill, dated March 22, 2007 (included as Exhibit 10.1 to the Form 8-K filed March 28, 2007 and incorporated herein by reference).
|
10.9
|
Stock Option Agreement between the Company and David Patterson, dated March 22, 2007 (included as Exhibit 10.2 to the Form 8-K filed March 28, 2007 and incorporated herein by reference).
|
10.10
|
Tootie Pie Company, Inc. 2008 Stock Option and Incentive Plan, dated January 14, 2008 (included as Exhibit 10.1 to the Registration Statement on Form S-8 filed January 22, 2008 and incorporated herein by reference).
|
10.11
|
Securities Purchase Agreement, by and between Tootie Pie Company, Inc. and Dawson Holdings, L.P., dated August 26, 2010 (included as Exhibit 10.1 to the Form 8-K filed on August 31, 2010 and incorporated herein by reference).
|
10.12
|
Employment Agreement between the Company and Don Merrill dated December 1, 2010 (included as Exhibit 10.1 to the Form 8-K filed on December 7, 2010 and incorporated herein by reference).
|
31.1
|
Certification of the Chief Executive Officer/Interim Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
32.1
|
Certification of Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TOOTIE PIE COMPANY, INC. | |||
Date: February 15, 2011 |
By:
|
/s/ Don L. Merrill, Jr.
|
|
Don L. Merrill, Jr.
|
|||
President, Chief Executive Officer, Interim Chief Financial Officer and Principal Accounting Officer |
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