UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarter ended: March 31, 2013

 

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: 000-51388

 

CONO ITALIANO, INC.

(Exact name of registrant as specified in its charter)

 

Nevada		84-1665042
(State or other jurisdiction of		(IRS Employer I.D. No.)
incorporation)

 

10 Main Street

Keyport, NJ 07735

(Address of principal executive offices and Zip Code)

 

(877) 330-2666

(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 past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] 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 [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or 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:

 

	Large accelerated filer	[  ]		Accelerated filer	[  ]
	Non-accelerated filer	[  ]		Smaller reporting company	[X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

 

As of May 17, 2013, there were 110,002,165 shares outstanding of the registrant’s common stock.

 

 

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION
Item 1.		Financial Statements.		3
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations.		5
Item 3.		Quantitative and Qualitative Disclosures About Market Risk.		8
Item 4.		Controls and Procedures.		9
PART II – OTHER INFORMATION
Item 1.		Legal Proceedings.		9
Item 1A.		Risk Factors.		9
Item 2		Unregistered Sales of Equity Securities and Use of Proceeds.		9
Item 3		Defaults Upon Senior Securities.		9
Item 4.		Mining Safety Disclosures.		9
Item 5.		Other Information.		9
Item 6.		Exhibits.		10
Signatures				11

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA CORPORATION)

Keyport, New Jersey

 

FINANCIAL REPORTS

AT

MARCH 31, 2013

 

 

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA Corporation)

Keyport, New Jersey

 

TABLE OF CONTENTS

 

Consolidated Balance Sheets at March 31, 2013 and December 31, 2012 (Unaudited)	F-1
Consolidated Statements of Changes in Stockholders’ Deficit for the Period from Date of Inception (March 2, 2006) Through March 31, 2013 (Unaudited)	F-2
Consolidated Statements of Operations for the Three Months Ended March 31, 2013 and 2012 and the Period from Inception (March 2, 2006) Through March 31, 2013 (Unaudited)	F-3
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2013 and 2012 and the Period from Inception (March 2, 2006) Through March 31, 2013 (Unaudited)	F-4
Notes to Consolidated Financial Statements	F-5 - F-14

 

  

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA CORPORATION)

Keyport, New Jersey

 

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

		March 31, 2013				December 31, 2012
ASSETS
Cash and Cash Equivalents		$	14,028			$	30,562
Accounts Receivable, Net of Allowance for Doubtful Accounts			—				2,465
Due from Related Party			16,937				16,937
Prepaid Expenses			60,905				66,000
Deferred Equity Financing Costs			84,591				84,591
Deferred Note Payable Issuance Costs - Net of Accumulated Amortization			—				6,521
Total Current Assets			176,461				207,076
Property and Equipment - Net of Accumulated Depreciation			152,263				167,537
Total Assets		$	328,724			$	374,613
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Liabilities
Accounts Payable		$	140,871			$	135,508
Accrued Expenses			123,119				126,206
Accrued Legal Expense			209,769				199,269
Accrued Interest - Officer			61,925				59,834
Accrued Compensation - Officers			281,250				225,000
Note Payable			68,908				67,228
Convertible Note Payable, Net			250,000				247,807
Due to Officer			767,317				767,317
Total Liabilities			1,903,159				1,828,169
Stockholders’ Deficit
Common Stock - $.001 Par; 150,000,000 Shares Authorized, 110,002,165 and 107,233,087 Shares Issued and Outstanding			110,002				107,233
Additional Paid-In-Capital			1,480,091				1,406,125
Deficit Accumulated During Development Stage			(3,164,528	)			(2,966,914	)
Total Stockholders’ Deficit			(1,574,435	)			(1,453,556	)
Total Liabilities and Stockholders’ Deficit		$	328,724			$	374,613

 

The accompanying notes are an integral part of these financial statements.

 

 

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA CORPORATION)

Keyport, New Jersey

 

CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT FOR THE PERIOD FROM DATE OF INCEPTION (MARCH 2, 2006) THROUGH MARCH 31, 2013 (UNAUDITED)

 

																		Deficit
		Common Stock								Common				Additional				Accumulated				Total
		$ .001 Par								Stock				Paid-In				During				Stockholders’
		Shares				Amount				Subscribed				Capital				Development Stage				Deficit
Balance - March 2, 2006			—			$	—			$	—			$	—			$	—			$	—
Common Stock Issued for Contribution of License Rights and Equipment			6,000,000				6,000				—				159,000				—				165,000
Net Loss			—				—				—				—				—				—
Balance - December 31, 2006			6,000,000				6,000				—				159,000				—				165,000
Net Loss			—				—				—				—				(50,290	)			(50,290	)
Balance - December 31, 2007			6,000,000				6,000				—				159,000				(50,290	)			114,710
Additional Paid-In-Capital - Deemed Distribution			—				—				—				(312,000	)			—				(312,000	)
Common Stock Issued to Prior Owners			3,000,000				3,000				—				54,000				—				57,000
Common Stock Issued in Exchange for Services			44,250,000				44,250				—				434,494				—				478,744
Net Loss			—				—				—				—				(929,795	)			(929,795	)
Balance - December 31, 2008			53,250,000				53,250				—				335,494				(980,085	)			(591,341	)
Common Stock Issued in Exchange for Services			7,616,428				7,616				—				178,777				—				186,393
Common Stock Issued for Cash			262,000				262				—				64,608				—				64,870
Common Stock Issued for Related Party Expense			500,000				500				—				69,500				—				70,000
Acquisition of Shell (1)			242,560				243				—				(272,946	)			—				(272,703	)
Common Stock Issued to Relieve Accounts Payable			10,000				10				—				3,490				—				3,500
Common Stock Issued for Note Payable Conversion			18,000,000				18,000				—				—				—				18,000
Net Loss			—				—				—				—				(437,325	)			(437,325	)
Balance - December 31, 2009			79,880,988				79,881				—				378,923				(1,417,410	)			(958,606	)
Common Stock Issued for Note Payable Conversion			2,000,000				2,000				—				182,547				—				184,547
Common Stock Issued in Exchange for Services			10,000,000				10,000				—				83,880				—				93,880
Common Stock Issued - Licensing Agreement			125,000				125				—				75,691				—				75,816
Net Loss			—				—				—				—				(348,521	)			(348,521	)
Balance - December 31, 2010			92,005,988				92,006				—				721,041				(1,765,931	)			(952,884	)
Common Stock Issued to Prior Owners			3,184,000				3,184				—				90,336				—				93,520
Common Stock Issued in Exchange for Services			3,325,000				3,325				—				152,924				—				156,249
Common Stock Cancelled			(3,280,000	)			(3,280	)			—				(27,836	)			—				(31,116	)
Stock Subscription, Net of Cash Proceeds Received			4,000,000				4,000				526				195,474				—				200,000
Net Loss			—				—				—				—				(504,465	)			(504,465	)
Balance - December 31, 2011			99,234,988				99,235				526				1,131,939				(2,270,396	)			(1,038,696	)
Common Stock Issued for Cash			2,000,000				2,000				—				73,000				—				75,000
Common Stock Issued in Exchange for Services			4,100,000				4,100				—				136,900				—				141,000
Common Stock Issued in Exchange for Equity Financing			998,099				998				—				51,502				—				52,500
Stock Subscription Issuance			900,000				900				(526	)			(374	)			—				—
Discount on Convertible Note Payable			—				—				—				13,158				—				13,158
Net Loss			—				—				—				—				(696,518	)			(696,518	)
Balance - December 31, 2012			107,233,087				107,233				—				1,406,125				(2,966,914	)			(1,453,556	)
Common Stock Issued in Exchange for Services			2,000,000				2,000				—				58,000				—				60,000
Common Stock Issued in Exchange for Equity Financing			769,078				769				—				15,966				—				16,735
Net Loss for the Period			—				—				—				—				(197,614	)			(197,614	)
Balance - March 31, 2013			110,002,165			$	110,002			$	—			$	1,480,091			$	(3,164,528	)		$	(1,574,435	)

 

The accompanying notes are an integral part of these financial statements.

 

 

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA CORPORATION)

Keyport, New Jersey

 

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

										Period From
										Date of Inception
										(March 2, 2006)
										Through
For the Three Months Ended March 31,		2013				2012				March 31, 2013
Sales		$	14,810			$	—			$	171,789
Cost of Sales			17,554				—				144,590
Gross Profit			(2,744	)			—				27,199
Expenses
Selling and Direct			61,307				1,760				573,514
Compensation Expense			56,250				56,250				701,255
General and Administrative			46,774				44,911				1,464,145
Depreciation Expense			17,074				12,067				191,093
Interest Expense			13,465				7,138				131,679
Loss on Impairment of License Right			—				—				130,505
Loss (Gain) on Disposal of Assets			—				—				(464	)
Total Expenses			194,870				122,126				3,191,727
Net Loss for the Period		$	(197,614	)		$	(122,126	)		$	(3,164,528	)
Loss per Share - Basic and Diluted		$	(0.00	)		$	(0.00	)		$	(0.05	)
Weighted Average Common Shares Outstanding			109,296,252				100,071,849				58,754,970

 

The accompanying notes are an integral part of these financial statements.

 

 

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA CORPORATION)

Keyport, New Jersey

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

										Period From
										Date of Inception
										(March 2, 2006)
										Through
For the Three Months Ended March 31,		2013				2012				March 31, 2013
Cash Flows from Operating Activities
Net Loss for the Period		$	(197,614	)		$	(122,126	)		$	(3,164,528	)
Adjustments to Reconcile Net Loss for the Period to Net Cash Flows from Operating Activities:
Amortization of Deferred Note Payable Issuance Costs			6,521				3,260				58,619
Amortization of Debt Discount			2,193				1,096				13,156
Bad Debts			—				—				2,440
Depreciation			17,074				12,067				127,298
Common Stock Issued in Exchange for Services			60,000				—				1,001,823
Expense to Prior Owners			—				—				350,520
Loss on Impairment of License Right			—				—				130,505
Loss on Disposal of Assets			—				—				(464	)
Common Stock Issued in Lieu of Rent Expense			—				—				36,000
Changes in Assets and Liabilities:
Accounts Receivable			2,465				—				(2,440	)
Prepaid Expenses			5,095				—				(13,577	)
Accounts Payable			5,363				—				(19,095	)
Accrued Expenses			13,648				5,844				82,763
Accrued Compensation - Officers			56,250				56,250				281,250
Accrued Legal Expense			10,500				10,499				147,605
Accrued Interest			3,771				6,042				110,394
Deferred Revenues			—				—				75,818
Net Cash Flows Used In Operating Activities			(14,734	)			(27,068	)			(781,913	)
Cash Flows from Investing Activities
Proceeds from Sale of Asset			—				—				5,000
Acquisition of Cash in Reorganization			—				—				916
Purchase of Property and Equipment			(1,800	)			(8,342	)			(269,100	)
Net Cash Flows Used In Investing Activities			(1,800	)			(8,342	)			(263,184	)
Cash Flows from Financing Activities
Bank Overdraft			—				(3,348	)			—
Cash Proceeds from Convertible Note Payable			—				250,000				250,000
Cash Paid for Deferred Equity Financing Costs			—				(30,000	)			—
Cash Proceeds from Issuance of Debt			—				—				27,698
Repayment of Debt			—				—				(27,698	)
Cash Proceeds from Convertible Note Payable			—				—				—
Cash Paid for Issuance of Deferred Note Payable			—				(39,125	)			(34,125	)
Cash Proceeds from Sale of Stock			—				—				339,870
Cash Received (Paid to) from Related Party - Net			—				(30,000	)			48,063
Due to Officer - Net			—				45,342				455,317
Net Cash Flows Used In Financing Activities			—				192,869				1,059,125
Net Change in Cash and Cash Equivalents			(16,534	)			157,459				14,028
Cash and Cash Equivalents - Beginning of Year			30,562				—				—
Cash and Cash Equivalents - End of Year		$	14,028			$	157,459			$	14,028
Supplemental Non-Cash Investing and Financing Activities:
Acquisition of Accounts Payable in Reorganization		$	—			$	—			$	210,132
Acquisition of Notes Payable in Reorganization		$	—			$	—			$	47,988
Deemed Distribution		$	—			$	—			$	312,000
Expenses Paid by Related Party		$	—			$	—			$	5,000
Common Stock Issued (Retired) for Prepaid Expenses		$	—			$	—			$	105,828
Common Stock Issued to Relieve Accounts Payable		$	—			$	—			$	3,500
Common Stock Issued for Note Payable Conversion		$	—			$	—			$	202,547
Common Stock Issued for Related Party Payable		$	—			$	—			$	70,000
Cash Paid During the Period for:
Interest		$	—			$	—			$	—
Income Taxes		$	—			$	—			$	—

 

The accompanying notes are an integral part of these financial statements.

 

 

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA CORPORATION)

Keyport, New Jersey

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note A -	The Company
	Merger and Recapitalization
	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.
	The Company was previously party to a joint venture named Xinjiang Yajia Distillate Company Limited (the “Venture”) to produce ethanol in the People’s Republic of China. The Company’s board of directors determined that it was in the Company’s best interest to initiate a withdrawal from the ethanol business as of January 31, 2009 and assess alternative businesses.
	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 (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.
	Under the terms of 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. The Board also appointed four new officers of the Company.
	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 split. All fractional shares resulting from the reverse stock split have been rounded up to the next whole share.
	Janex International Inc. was formed on July 6, 2007, in the State of Delaware. On January 8, 2008 Janex International Inc., changed its name to Cono Italiano, Inc (Delaware).
	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.

 

- continued -

 

 

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA CORPORATION)

Keyport, New Jersey

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note A -	The Company - continued
	Merger and Recapitalization
	In March 2007, the license rights held by the individual founders of Cono, LLC were sold to The Total Luxury Group (TLG), an unrelated entity. 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. (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, Inc. (Delaware) valued at $114,000 and was issued a promissory note for $312,000. Mitchell Brown is also a principal stockholder in Cono, Inc. (Delaware).
	The transaction was accounted for as a recapitalization of Cono, Inc. and Cono, LLC; as both companies were under common control. As such, the assets and liabilities of Cono, LLC were carried over to Cono, Inc. (Delaware) at the historical carrying values.
	At the time of the sale of Cono, LLC to Cono, Inc. (Delaware), Cono LLC 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.
	On November 12, 2009 Cono Inc. (Delaware) entered into a share exchange agreement whereby Cono Inc. (Delaware) would exchange all of its common stock for the stock of Tiger Renewable Energy, Inc. (TRE) (a shell company) on a share for share basis. Prior to entering into the share exchange agreement, the principal stockholder of Cono Inc. (Delaware) became a stockholder of TRE, either through direct ownership or through an entity in which he controlled, effectively gaining control of TRE, and on August 10, 2009, TRE changed its name to Cono Italiano, Inc., a Nevada corporation. As an inducement for Cono (Delaware) to enter the share exchange agreement, TRE’s largest shareholder has agreed to the cancellation of 242,557 shares of Cono (Nevada) stock.
	The exchange of shares between Cono Italiano, Inc., (Delaware) and Cono Italiano, Inc., (Nevada) was 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, Inc. (Nevada) will carry over to the surviving company.
	Effective at the closing of the share exchange transactions, November 12, 2009, Cono (Delaware) became a wholly owned subsidiary of Cono (Nevada).
	On December 13, 2011 the Board of Directors approved increasing the authorized shares of common stock from 100,000,000 to 150,000,000.

 

- continued -

 

 

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA CORPORATION)

Keyport, New Jersey

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note A -	The Company - continued
	Scope of Business
	The Company is licensed to distribute an innovative food product - a cone-shaped pizza called “Pizza Cono.” The product will be distributed into fast food market establishments which include typical fast food chains, supermarkets, convenience stores, entertainment facilities, and sports arenas. The Company’s focus will be the sale and management of licensing and distribution agreements with customers.
Note B -	Summary of Significant Accounting Policies
	Basis of Presentation
	The condensed consolidated financial statements of Cono Italiano, Inc. (the “Company”) 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 consolidated financial statements should be read in conjunction with the annual audited financial statements and the notes thereto included in the Company’s registration statement on Form 10-K, 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.
	Principles of Consolidation
	The consolidated financial statements include the accounts of Cono Italiano, Inc. (Nevada) and its wholly owned subsidiary, Cono Italiano, Inc. (Delaware) (the “Company”). All significant intercompany balances have been eliminated in consolidation.
	Method of Accounting
	The Company maintains its books and prepares its financial statements on the accrual basis of accounting.
	Development Stage
	The Company has operated as a development stage enterprise since its inception by devoting substantially all of its efforts to financial planning, raising capital, research and development, and developing markets for its services. The Company prepares its financial statements in accordance with the requirements of FASB ASC 915, “Development Stage Entities.”
	Accounts Receivable
	Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Customer accounts over 90 days old are considered delinquent.

 

 

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA CORPORATION)

Keyport, New Jersey

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note B -	Summary of Significant Accounting Policies – continued
	Accounts Receivable - continued
	The carrying amount of accounts receivable are reduced by an allowance for doubtful accounts that reflects our Company’s best estimate of the amounts that will not be collected. The Company reviews outstanding accounts and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. The Company provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of the individual accounts. Balances that are still outstanding after reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. The Company has assessed accounts receivable and determined that a reserve is necessary and at March 31, 2013 and December 31, 2012, the allowance for doubtful accounts was $2,440 and $2,440, respectively.
	Revenue Recognition
	The Company recognizes revenue when title, ownership and risk of loss pass to the customer. Transfer of title occurs and risk of ownership generally passes to a customer at the time of shipment or delivery, depending on the terms of the agreement with a particular customer. The sale price of the Company’s products is substantially fixed or determinable at the date of sale based on purchase orders generated by a customer and accepted by the Company. A customer is obligated to pay for products sold to it within a specified number of days from the date that title to the products is transferred to the customer. The Company’s standard terms are typically net 30 days from the transfer of title to the products to the customer. The Company typically expects payment from a customer within 30 to 45 days from the transfer of title to the products to a customer. Shipping and handling costs are charged to the customer and are included in revenue.
	Customer Concentrations
	Two customers accounted for approximately $11,105 or 74%, of net sales for the three months ended March 31, 2013. Various other customers accounted for the remaining sales of $3,705 or 26%. All transactions were in United States dollars. There were no transaction gains or losses associated with sales transactions.
	Income Taxes
	The Company accounts for income taxes in accordance with FASB ASC 740, “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 FASB ASC 260, “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.

 

- continued -

 

 

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA CORPORATION)

Keyport, New Jersey

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note B -	Summary of Significant Accounting Policies – continued
	Earnings per Share
	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.
	In a loss year, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive. At March 31, 2013, there were 4,651,395 shares that could dilute future earnings.
	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 based on service provided 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 FASB ASC 505, “Equity Based Payments to Non-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.
	The Company follows the provisions of FASB ASC 718. FASB ASC 718 requires recognition in the financial statements of the cost of employee services received in exchange for an award of equity instruments over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period). FASB ASC 718 also requires measurement of the cost of employee services received in exchange for an equity award based upon the grant-date fair value of the award.
Note C -	Recently Issued Accounting Standards
	The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

 

 

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA CORPORATION)

Keyport, New Jersey

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note D -	Related Party Transactions
	Due from Related Party
	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.
	The Company purchased manufacturing equipment on behalf of Edesia to be used by an unrelated entity for the production of the pizza cone 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.
	The advances are non-interest bearing and is due upon demand. Due from related party consists of the following:

			March 31, 2013				December 31, 2012
	Edesia Emprise, LLC		$	16,937			$	16,937

 

	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. Edesia Emprise, LLC may either produce this product directly or through a subcontractor. As of December 31, 2012 this contract was terminated.
	In November 2009, Edesia Emprise, LLC has entered into a subcontract agreement with Sunrise Bakery, located in Brooklyn, New York, to produce the cones for the Pizza Cono product on behalf of Edesia Emprise, LLC. As of December 31, 2012 this contract was terminated.
	Due to Officer
	Certain disbursements of the Company have been paid by an officer of the Company. The balance at December 31, 2012 and 2011 was $767,317 and $724,975, respectively. There are no established repayment terms. For the periods ended March 31, 2013 and December 31, 2012, the Company has imputed interest at the applicable federal rate of 1.09% and 0.95%, respectively. Accrued interest was $61,925 and $59,834, at March 31, 2013 and December 31, 2012, respectively.

 

 

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA CORPORATION)

Keyport, New Jersey

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note E -	Accrued Legal Expense
	Accrued legal expense consists of legal services rendered to the Company in the ordinary course of business including SEC filings and the reverse merger. Accrued legal expense at March 31, 2013 and December 31, 2012 was $209,769 and $199,269, respectively.
Note F -	Note Payable
	The Company has a note payable to DT Crystal Limited accruing interest at 10% annually which is due upon demand. The note is convertible at option of the holder into restricted stock of Cono (Nevada). At March 31, 2013 and December 31, 2012 note payable to DT Crystal was $68,908 and $67,228, respectively. Interest expense for the three months ended March 31, 2013 and 2012 was $1,681 and $1,523, respectively.
Note G -	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 $3,164,528 at March 31, 2013.
	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 J -	Employment Contracts
	On December 30, 2009 the Company entered into employment agreements with each of the officers serving the Company. The employment agreements contained the following provisions: (i) two-year terms with automatic renewal provisions unless notice is given by either party 30 days prior to renewal; (ii) commitment of a substantial portion of their professional time to the Company, consisting of 75% of their time for Mitchell Brown and 60% of their time for each of Alex Kaminski and Steve Savage; and (iii) 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 January 1, 2012. At March 31, 2013 accrued compensation was $281,250. The compensation of the officers has been set as follows:

 

			Annual
	Officer		Salary
	Mitchell Brown, Chief Executive Officer		$	125,000
	Alex Kaminski, Chief Financial Officer and Treasurer		$	50,000
	Steve Savage, Secretary		$	50,000

 

It has been agreed by the Company, Mr. Smith, a director and Mr. Kaminski that pursuant to separate stock option agreements, Mr. Smith will be granted options to purchase 2,000,000 shares of the Company’s common stock at $.01 per share and Mr. Kaminski will be granted options to purchase 1,500,000 shares of the Company’s common stock at $.01 per share. These options will vest in one year and will expire in three years. As of March 31, 2013, the stock agreements have not been executed, therefore the options have not been granted.

 

 

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA CORPORATION)

Keyport, New Jersey

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note K -	Security Agreement
	On February 27, 2012, the Company entered into a security agreement with TCA Global Credit Master Fund, LP, a Cayman Islands limited partnership related to a $250,000 convertible promissory note issued by the Company in favor of TCA to acquire equipment and for operational expenses. The Security Agreement grants to TCA a continuing, first priority security interest in all of the Company’s assets, wheresoever located and whether now existing or hereafter arising or acquired.
	On February 27, 2012, the Company issued the Convertible Note in favor of TCA. The maturity date of the Convertible Note is February 27, 2013, and the Convertible Note bears interest at a rate of twelve percent (12%) per annum. Interest will accrue monthly but is due and payable upon maturity date of note. The Convertible Note is convertible into shares of the Company’s common stock at a price equal to ninety-five percent (95%) of the lowest daily volume weighted average price of the Company’s common stock during the five (5) trading days immediately prior to the date of conversion. The Convertible Note may be prepaid in whole or in part at the Company’s option without penalty. As of the date of this report, the convertible note has not been repaid, but the Company is negotiating a resolution.
	The above Convertible Note contains a beneficial conversion feature recorded as a debt discount in the amount of $13,157 which will be expensed to interest expense over the term of the note. $2,193 of debt discount was expensed during the three months ended March 31, 2013. The note value, net of debt discount, was $250,00 at March 31, 2013. Accrued interest at March 31, 2013 and March 31, 2012 was $32,500 and $25,000 respectively.
	On February 27, 2012, the Company entered into the Equity Agreement with TCA. Pursuant to the terms of the Equity Agreement, for a period of twenty-four (24) months commencing on the date of effectiveness of a Registration Statement, TCA shall commit to purchase up to $1,500,000 of the Company’s common stock, par value $0.001 per share. The purchase price of the Shares under the Equity Agreement is equal to ninety-five percent (95%) of the lowest daily volume weighted average price of the Company’s common stock during the five (5) consecutive trading days after the Company delivers to TCA an Advance notice in writing requiring TCA to advance funds to the Company, subject to the terms of the Equity Agreement. At March 31, 2013, no shares had been purchased.
	As further consideration for TCA entering into and structuring the Equity Facility, the Company paid to TCA a fee by issuing to TCA that number of shares of the Company’s common stock that equal a dollar amount of fifty-two thousand and five hundred dollars ($52,500) (the “Facility Fee Shares”). It is the intention of the Company and TCA that the value of the Facility Fee Shares shall equal $52,500. In the event the value of the Facility Fee Shares issued to TCA does not equal $52,500 after a nine month evaluation date, the Equity Agreement provides for an adjustment provision allowing for necessary action (either the issuance of additional shares to TCA or the return of shares previously issued to TCA to the Company’s treasury) to adjust the number of Facility Fee Shares issued. As of December 31, 2012, 998,099 shares of common stock have been issued as consideration for the Equity Facility fee. The nine month analysis concluded that the Company owes TCA 1,317,508 common shares in the amount equal to $32,091. As of March 31, 2013, 769,078 additional shares had been issued. A total of $84,591 is included in Deferred Equity Financing Costs at March 31, 2013 which will be netted against proceeds when shares are purchased pursuant to the Equity Agreement.

 

 

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA CORPORATION)

Keyport, New Jersey

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note L -	Other Matters
	On November 6, 2009, Cono Italiano (Delaware) entered into a Commitment Letter, pursuant to which, one of the Company’s 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.
	The Company 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. As of March 31, 2013, the agreement was still in effect and no funds have been borrowed.
	On July 11, 2011 the Company signed a subscription agreement with an individual to purchase 4,525,640 shares of the Company’s common stock in four (4) installments of $50,000 each, totaling $200,000. As of December 31, 2011 all of the four installments had been received totaling $200,000. The Company has issued 4,000,000 shares of the 4,525,640 that were to be issued. 525,640 shares of common stock are due to the individual for his investment, therefore, common stock subscribed is $526 at December 31, 2011. During the year ended December 31, 2012 the Company issued the individual the 525,640 shares due him under the subscription agreement and in accordance with this agreement since the individual was entitled to 4.9% of the outstanding shares of the Company at the date of the final issuance the individual received an additional 374,360 shares of common stock.
	On September 7, 2011 the Company entered into a manufacturing agreement with Interstate Caterers for the purposes of manufacturing, producing and distributing “pizza cono”. As consideration for Interstate entering into the agreement, the Company agreed to issue 3,500,000 shares of its restricted common stock upon the execution of the agreement. As of December 31, 2012 the stock had been issued. As consideration for Interstate’s services under the agreement, Interstate will receive seventy percent (70%) of the difference between the sales price for the product less direct manufacturing costs for such product, regardless of whether the Company or Interstate initiated the sales of such product. In addition, the Company will lease to Interstate certain equipment to be used in the manufacture of the Cono products for $1.00 per year. For the three months ended March 31, 2013 and the year ended December 31, 2012 the Company and Interstate have modified the consideration portion of what Interstate will receive. Interstate has agreed to forgo the 70% difference since sales of the product are in the initial phase in order to help the Company promote the product.

 

- continued -

 

 

CONO ITALIANO, INC.

(A DEVELOPMENT STAGE COMPANY)

(A NEVADA CORPORATION)

Keyport, New Jersey

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Note L -	Other Matters – continued
	The term of the agreement is for a period of ten years commencing on September 7, 2011, the execution date of the agreement, and automatically renews for one additional ten-year period unless either the Company or Interstate provides the other notice of its intention to not renew at least thirty days prior to the end of the Initial Term. The agreement may be earlier terminated at any time by the mutual consent of the Company and Interstate. The Company may unilaterally terminate the agreement based on, among other things, Interstate’s non-performance in accordance with the Company’s specifications. In addition, Interstate indemnifies the Company against third party claims based on alleged product defects.
Note M -	Subsequent Events
	As of the date of this report, the Company has not paid TCA the principal and accrued interest that was due on their convertible note on February 27, 2013. Due to circumstances surrounding the financing, the Company is in negotiations to fulfill their obligation.

 

 

Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

This quarterly report on Form 10-Q and other reports filed by Cono Italiano, Inc. (“we,” “us,” “our,” or the “Company”), from time to time with the U.S. Securities and Exchange Commission (the “SEC”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan,” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

 

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates.

 

Plan of Operation

 

On September 7, 2011, we entered into a strategic manufacturing agreement (the “Agreement”) with Interstate Caterers and continue moving forward with the production and distribution of our frozen foods and Pizza Cono. Additionally, we recently added empanadas to our product line which we believe will increase our market for sales. We plan to fund the manufacturing process of these products through the use of private funding investors and resources from Interstate Caterers.

 

In November 2011, we, together with our manufacturing partner, completed construction on our USDA and FDA approved facility for our Pizza Cono and new line of frozen foods. Additionally, we purchased the balance of equipment required to produce our filled cones and frozen foods. This equipment will enable Cono Italiano, Inc., to produce a frozen cone filled with a variety of toppings by using an automated filling line. We expect to be the sole producer of frozen filled cones made in the United States with USDA and FDA approval. We believe this will provide us with an advantage over our competitors in the market place.

 

The Company plans to continue manufacturing and delivering its products to customers. We also plan to expand our USDA facility by adding machines to fill and manufacture our pizza cones and empanadas. We plan to secure through financing certain equipment required to manufacture and distribute our products to retail vendors and other suppliers in our market. These machines include a carton machine, which packages box the pizza cones and empanadas in boxes for retail, and a Flo Pack machine, which wraps pizza cones and empanadas in microwavable bags prior to being packaged. We expect to introduce additional flavors and new products to our product line in 2013. 

 

 

Results of Operations

 

For the three months ended March 31, 2013 compared to the three months ended March 31, 2012

 

Revenues and Profit

 

In the three month period ended March 31, 2013, Cono Italiano had total revenue of $14,810, compared to total revenue of $-0- for the same period in 2012. The increase in total revenue is attributable to sales of Cono’s product.

 

The Company’s gross loss for the three month period ended March 31, 2013, were $(62,744), which was a decrease from $-0- for the same period in 2012.  The decline in gross profits is attributable to the Company providing sales incentives to induce sales of product. The increase in cost of goods sold is attributable to the issuance of common stock valued at $60,000 to a customer as promotional incentive.

 

Expenses

 

For the three month period ended March 31, 2013, the Company’s selling expenses have been $1,307, compensation expenses have been $56,250, general and administrative expenses have been $46,774, depreciation expense was $17,074 and interest expenses were $13,465. This was an increase compared to the same period in 2012, in which selling expenses were $1,760, compensation expenses were $56,250, general and administrative expenses were $44,911, depreciation expense was $12,067 and interest expenses were $7,138. There was no increase or decrease to compensation expenses. General and administrative expenses increased by $1,863 which was attributable to necessary operating expenses. Depreciation increased by $5,007 due to the purchase of new equipment in 2012 and interest expense increased by $6,327 due to the increase in debt in 2012.

 

Net Loss

 

The net loss for the three month period ended March 31, 2013 was $197,614, which was an increase from $122,126 for the same period in 2012. This increase is attributable to slower sales than expected, customer promotional incentive and increases in depreciation and interest expenses.

 

Liquidity and Capital Resources

 

As of March 31, 2013, the Company did not have and continues to not have sufficient cash on hand to pay present obligations as they become due. In addition, due to current economic conditions and the Company’s related risks and uncertainties, there is no assurance that we will be able to raise additional capital on acceptable terms, if at all, to meet our current obligation over the next 12 months. Because of the foregoing, the Company’s auditors have expressed substantial doubt about our ability to continue as a going concern in their report included in our most recent 10-K.

 

Net cash used for operating activities for the three months ended March 31, 2013 and 2012, was $14,734 and $27,068, respectively.

 

As of March 31, 2013, Cono Italiano had $14,028 in cash and cash equivalents, as compared to $30,562 as of December 31, 2012. The main source of the Company’s cash has been loans from our Chief Executive Officer, Mitchell Brown, who is owed $767,317 as of March 31, 2013 and as of December 31, 2012.

 

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”). Lara Mac is wholly owned by Mitch Brown, our Chief Executive Officer. 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. 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. As of March 31, 2013, there had been no borrowings under the Commitment Letter.

 

 

The following table summarizes total current assets, liabilities and working capital at March 31, 2013, compared to December  31, 2012.

 

		March 31, 2013 (unaudited)				December 31, 2012 (unaudited)				Increase/ (Decrease)
Current Assets		$	176,461			$	207,076			$	(30,165	)
Current Liabilities		$	1,903,159			$	1,828,169			$	74,990
Working Capital Deficit		$	(1,726,698	)		$	(1,621,093	)		$	(105,605	)

 

As of March 31, 2013, we had a working capital deficit of $(1,726,698), as compared to a working capital deficit of $(1,621,093) as of December 31, 2012, an increase of $(105,605). Factors contributing to the increase in this deficit include, an increase in accrued compensation – officers in the amount of $56,250, an increase in accrued interest on the convertible note in the amount of $7,500, an increase in accrued legal of $10,500 and an increase in accrued expenses in the amount of $13,648.

 

Current Liabilities consists of the following:

 

		March 31, 2013 Unaudited				December 31, 2012 Unaudited
Accounts payable and credit cards		$	140,871			$	140,871
Accrued Compensation - Officers			281,250				225,000
Convertible Debentures and Accrued Interest			282,500				272,807
Note Payable and Accrued Interest			68,908				67,228
Other Current Liabilities			1,129,630				1,122,263
Total current liabilities		$	1,903,159			$	1,828,169

 

 

Critical Accounting Policies and Estimates

 

Our consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). The preparation of the financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. Though we evaluate our estimates and assumptions on an ongoing basis, our actual results may differ from these estimates.

 

Accounts Receivable

 

Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Customer accounts over 90 days old are considered delinquent. The carrying amount of accounts receivable are reduced by an allowance for doubtful accounts that reflects our Company’s best estimate of the amounts that will not be collected. The Company reviews outstanding accounts and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. The Company provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of the individual accounts. Balances that are still outstanding after reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. The Company has assessed accounts receivable and determined that a reserve is necessary and at March 31, 2013 and December 31, 2012, the allowance for doubtful accounts was $2,440 and $2,440, respectively.

 

Revenue Recognition

 

The Company recognizes revenue when title, ownership and risk of loss pass to the customer. Transfer of title occurs and risk of ownership generally passes to a customer at the time of shipment or delivery, depending on the terms of the agreement with a particular customer. The sale price of the Company’s products is substantially fixed or determinable at the date of sale based on purchase orders generated by a customer and accepted by the Company. A customer is obligated to pay for products sold to it within a specified number of days from the date that title to the products is transferred to the customer. The Company’s standard terms are typically net 30 days from the transfer of title to the products to the customer. The Company typically expects payment from a customer within 30 to 45 days from the transfer of title to the products to a customer. Shipping and handling costs are charged to the customer and are included in revenue. 

 

Customer Concentrations

 

Two customers accounted for approximately $11,105 or 74%, of net sales for the three months ended March 31, 2013. Various other customers accounted for the remaining sales of $3,705 or 26%. All transactions were in United States dollars. There were no transaction gains or losses associated with sales transactions.

 

Recently Issued Accounting Standards

 

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flow.

 

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 FASB ASC 505, “Equity Based Payments to Non-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.

 

Stock-based compensation related to employees and directors is recognized pursuant to the provisions of FASB ASC 718. FASB ASC 718 requires recognition in the financial statements of the cost of employee services received in exchange for an award of equity instruments over the period the employee is required to perform the services in exchange for the award (presumptively the vesting period). FASB ASC 718 also requires measurement of the cost of employee services received in exchange for an equity award based upon the grant-date fair value of the award.

 

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: Quantitative and Qualitative Disclosures About Market Risk.

 

We did not have any operations which implicated market risk as of the end of the latest fiscal year. We intend to implement an analysis and assessment program which will on a regular basis determine exposures of the Company to future risks. We expect to report the results of all such quantitative and qualitative risk assessments prior to entering into any material agreements, and on a regular monthly and annual basis to our audit committee so that responsive risk management measures can be discussed and actions taken to the extent reasonably feasible. Inflationary factors in the future, such as increases in overhead costs, may adversely affect our operating results. A high rate of inflation in the future may have an adverse effect on our ability to manage selling, general and administrative expenses as a percentage of net revenues if our revenues do not increase with these increased costs.

 

 

Item 4: Controls and Procedures.

 

Pursuant to Rule 13a- 15(b) under the Exchange Act, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s PEO and PFO concluded that the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s PEO and PFO, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control Over Financial Reporting

 

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II: OTHER INFORMATION

 

Item 1: Legal Proceedings.

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A: Risk Factors.

 

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K/A for the year ended December 31, 2012, filed with the SEC on May 10, 2013.

 

Item 2: Unregistered Sales of Equity Securities and Use of Proceeds.

 

There were no other unregistered sales of the Company’s equity securities during the quarter ended March 31, 2013, other than those previously reported in a Current Report on Form 8-K.

 

Item 3: Defaults Upon Senior Securities.

 

There were no defaults upon senior securities during the quarter ended March 31, 2013.

 

Item 4. Mining Safety Disclosures.

 

Not applicable.

 

Item 5: Other Information.

 

There is no other information required to be disclosed under this item which was not previously disclosed.

 

 

Item 6. Exhibits.

 

Exhibit No.		Description
31.1		Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002*
31.2		Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002*
32.1		Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2		Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

 

101.INS**		XBRL Instance Document
101.SCH**		XBRL Taxonomy Extension Schema Document
101.CAL**		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**		XBRL Taxonomy Extension Label Linkbase Document
101.PRE**		XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed Herewith.

** In accordance with Regulation S-T, the XBRL related information on Exhibit No. 101 to this Quarterly Report on Form 10-Q shall be deemed “furnished” herewith not “filed”.

  

 

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 thereunto duly authorized.

 

	CONO ITALIANO, INC.
	(Registrant)
Dated: May 28, 2013
	By:	/s/ Mitchell Brown
		Name:	Mitchell Brown
		Title:	Principal Executive Officer
Dated: May 28, 2013
	By:	/s/ Alex J. Kaminski
		Name:	Alex J. Kaminski
		Title:	Principal Financial Officer and Chief Accounting Officer