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Saturday, December 10, 2011 11:41:24 AM
bthr SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(amended October 25, 2011)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2011 [First Quarter]
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
COMMISSION FILE NO. 333-169145
BELLA PETRELLA’S HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Florida
27-0645694
State or other jurisdiction of
incorporation or organization
I.R.S. Employer Identification No.
109 South Edison Avenue
Tampa, Florida
33606
(Address of principal executive offices)
(Zip code)
Issuer’s telephone number: 516-375-6649
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act : None
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 requirements for the past 90 days.
YES þ
NO o
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 o
NO þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o
NO þ
The number of shares outstanding of each of the issuer’s classes of common stock at October14, 2011 was 20,041,600 shares of $0.01 par value common stock.
TABLE OF CONTENTS
PAGE
Part I - Financial Information
Item 1.
Financial Statements (Unaudited)
4
Balance Sheets
5
Statements Of Operations
6
Statements Of Cash Flows
7
Notes To The Financial Statements
8
Item 2.
Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
16
Item 3.
Quantitative And Qualitative Disclosures About Market Risk
19
Item 4.
Controls And Procedures
19
Part II - Other Information
Item 1.
Legal Proceedings
20
Item 2.
Unregistered Sales Of Equity Securities And Use Of Proceeds
20
Item 3.
Defaults Upon Senior Securities
20
Item 4.
Removed and Reserved by Commission
20
Item 5.
Other Information
20
Item 6.
Exhibits
20
2
SUMMARIES OF REFERENCED DOCUMENTS
This quarterly report on Form 10–Q contains references to, summaries of and selected information from material agreements and other documents. These agreements and documents are not incorporated by reference; but, they are filed as exhibits to this annual report or to other reports we have filed with the U.S. Securities and Exchange Commission. Whenever we make reference in this annual report to any of our material agreements and other documents, the summaries and selected information do not necessarily contain all of the terms and conditions of the material agreements and other documents. The summaries of and selected information from those material agreements and other documents are qualified in their entirety by the complete agreements and other documents. You may obtain the full text of the material agreements and other documents from the Public Reference Section of or online from the Commission.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10–Q may include “forward–looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend the forward–looking statements to be covered by the safe harbor provisions for forward–looking statements as described in that section.
This quarterly report contains forward-looking statements that involve risks and uncertainties. We use words such as “project”, “believe”, “anticipate”, “plan”, “expect”, “estimate”, “intend”, “should”, “would”, “could”, or “may”, or other such words, verbs in the future tense and words and phrases that convey similar meaning and uncertainty of future events or outcomes to identify these forward-looking statements. There are a number of important factors beyond our control that could cause actual results to differ materially from the results anticipated by these forward-looking statements. While we make these forward–looking statements based on various factors and using numerous assumptions, we have no assurance the factors and assumptions will prove to be materially accurate when the events they anticipate actually occur in the future.
The forward-looking statements are based upon our beliefs and assumptions using information available at the time the statements are made. We caution you not to place undue reliance on our forward-looking statements as (i) these statements are neither predictions nor guaranties of future events or circumstances, and (ii) the assumptions, beliefs, expectations, forecasts and projections about future events may differ materially from actual results. We undertake no obligation to publicly update any forward-looking statement to reflect developments occurring after the date of this quarterly report.
Use of Pronouns and Other Words
The pronouns “we”, “us”, “our” and the equivalent mean Bella Pretella’s Holdings, Inc. and our consolidated subsidiaries. In the notes to our financial statements, the “Company” means Bella Petrella’s Holdings, Inc. and our consolidated subsidiaries The pronoun “you” means the reader of this quarterly report on Form 10-Q.
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEX
FINANCIAL STATEMENTS OF
BELLA PETRELLA’S HOLDINGS, INC.
Page
Balance Sheets at August31, 2011(Unaudited) and May 31, 2011
5
Statements of Operations For the Three Months Ended August31, 2011 (Unaudited) and August31, 2010 (Unaudited)
6
Statements of Cash Flows For the Three months Ended August 31, 2011 (Unaudited) and August 31, 2010 (Unaudited)
7
Notes to Financial Statements (Unaudited)
8
4
Bella Petrella's Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Balance Sheets
August 31, 2011
May 31, 2011
(Unaudited)
Assets
Current Assets
Cash in Bank
$ 388 $ 193
Accounts Receivable
9,604 -
Prepaid Expenses
453,771 100,000
Total Current Assets
463,763 100,193
Other Assets
Prepaid Expenses
23,438 -
Trademarks
5,000 5,000
Total Other Assets
28,438 5,000
Total Assets
$ 492,201 $ 105,193
Liabilities and Shareholders' Equity (Deficit)
Current Liabilities
Accrued Executive Compensation
$ 121,171 $ 123,158
Accounts Payable (including related party balance of $108,924 and
$90,174 at August 31, 2011 and May 31, 2011, respectively)
172,681 134,682
Total Liabilities
293,852 257,840
Shareholders' Equity (Deficit)
Common Stock, $0.01 par value; 500,000,000 shares authorized;
19,236,600 and 16,855,600 shares issued and outstanding at
August 31, 2011 and May 31, 2011, respectively
192,366 168,556
Additional Paid-in Capital
1,110,677 615,687
Accumulated Deficit
(1,104,694 ) (936,890 )
Total Shareholders' Equity (Deficit)
198,349 (152,647 )
Total Liabilities and Shareholders' Equity
$ 492,201 $ 105,193
See accompanying notes to financial statements.
5
Bella Petrella's Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Statements of Operations
Three Months Ended August 31, 2011
Three Months Ended August 31, 2010
(Unaudited)
(Unaudited)
Revenues
Sales
$ 34,083 $ 27,795
Cost of Sales
Cost of Goods Sold
26,678 22,753
Gross Profit
7,405 5,042
Expenses
General and Administrative Expenses
175,209 169,241
Net Loss
$ (167,804 ) $ (164,199 )
Basic and diluted loss per share
$ (0.01 ) $ (0.01 )
Basic and diluted weighted average common
shares outstanding
17,353,369 15,859,948
See accompanying notes to financial statements.
6
Bella Petrella's Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Statements of Cash Flows
Three Months
Three Months
Ended
Ended
August 31, 2011
August 31, 2010
Cash flows from operating activities:
(Unaudited)
(Unaudited)
Net loss
$ (167,804 ) $ (164,199 )
Adjustments to reconcile net loss to net
cash (used) by operating activities:
Non-cash expenses
140,591 93,093
Changes in assets and liabilities:
Accounts Receivable
(9,604 ) 11,405
Inventory
- 339
Prepaid Expenses
- 37,471
Accrued Executive Compensation
(1,987 ) -
Accounts Payable
37,999 21,876
Net cash (used) by operating activities
(805 ) (15 )
Cash flows from financing activities:
Sale of common stock
1,000 -
Net cash provided by financing activities
1,000 -
Net increase (decrease) in cash
195 (15 )
Cash at beginning of period
193 298
Cash at end of period
$ 388 $ 283
Supplemental disclosures of non-cash investing and
financing activities:
Stock issued in exchange for payment of expenses by JVW Entertainment, Inc.
$ - $ 15,000
Common Stock issued in exchange for letter of intent
$ 90,000 $ -
Common Stock issued for services
$ 130,000 $ 250,000
Common Stock issued for prepayment of services
$ 295,000 $ -
Capital contribution for payment of expenses by JVW Entertainment
$ 2,800 $ -
See accompanying notes to financial statements.
7
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
.
(1) Nature of Business
Bella Petrella’s Holdings, Inc. (the "Company") is a marketing Company, incorporated in Florida on July 28, 2009. The Company sells its own line of gourmet pasta sauces and salsas. The Company’s principal assets are the 100% owned recipes developed by one of its founder.
(2) Basis of Presentation and Going Concern
While the information presented in the accompanying interim condensed financial statements is unaudited, it includes all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States of America. These interim financial statements follow the same accounting policies and methods of application as used in the May 31, 2011 audited financial statements of the Company. All adjustments are of a normal, recurring nature. Interim financial statements and the notes thereto do not contain all of the disclosures normally found in year-end audited financial statements, and these Notes to Interim Condensed Financial Statements are abbreviated and contain only certain disclosures related to the three months period ended August 31, 2011. It is suggested that these interim financial statements be read in conjunction with the Company’s period-end audited May 31, 2011 financial statements. Operating results for the three month period ended August 31, 2011 are not necessarily indicative of the results that can be expected for the year ending May 31, 2012.
The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due.
The Company has incurred net losses during the three months ended August 31, 2011 and 2010 of $167,804 and $164,199. respectively. In addition, the Company has no significant revenue-generating operations. To continue as a going concern, the Company plans to raise funds through private placements and public stock offerings. These funds will be used for marketing and payment of general and administrative expenses. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
(3) Significant Accounting Policies
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, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported revenues and expenses during the period. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Estimates that are critical to the accompanying financial statements include estimates related to classification of expenditures as either an asset or expense, valuation of deferred tax assets, and the likelihood of loss contingencies. Management bases its estimates and judgments on experience and on various other factors 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. Estimates and assumptions are revised periodically and the effects of revisions are reflected in the financial statements in the period it is determined to be necessary. Actual results may differ materially from these estimates under different assumptions or conditions.
8
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
(3) Significant Accounting Policies (continued)
Revenue Recognition
The Company accounts for revenue recognition in accordance with the Securities and Exchange Commission Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101) and FASB ASC 605 Revenue Recognition. The Company recognizes revenue when rights and risk of ownership have passed to the customer, when there is persuasive evidence of an arrangement, product has been shipped or delivered to the customer, the price and terms are finalized, and collections of resulting receivable is reasonably assured. Products are primarily shipped FOB shipping point at which time title passes to the customer.
The Company’s products are primarily sold to resellers and therefore the Company does not collect sales taxes.
Share-Based Compensation
U.S. GAAP requires companies to measure the cost of employee services received in exchange for the award of equity instruments based on the fair value of the award at the date of grant. The expense is to be recognized over the period during which an employee is required to provide services in exchange for the award.
The Company accounts for common stock warrants granted based on the fair market value of the instrument using the Black-Scholes option pricing model utilizing certain weighted average assumptions such as expected stock price volatility, term of the options and warrants, risk-free interest rates, and expected dividend yield at the grant date. Because the Company's common stock is not traded publicly, expected stock price volatility is based on a calculated value which was determined through the weighted average stock price volatilities of appropriate peer companies. The expected term of the warrants granted is equal to the estimated life of the warrants. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of the stock options. The Company does not expect to pay any dividends.
Income Taxes
Deferred taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and
deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates.
9
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
(3) Significant Accounting Policies (continued)
Income Taxes (continued)
Certain guidance located within Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 740, "Income Taxes" (“ASC Topic 740”), clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC Topic 740 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on the recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. The Company had no uncertain tax positions for the three months ended August 31, 2011 or three months ended August 31, 2010.
Net Loss Per Share
Basic loss per common share is computed based on weighted average shares outstanding and excludes any potential dilution from stock options, options and other common stock equivalents; this metric is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (i.e., options) were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. For the periods ended August 31, 2011 and May 31, 2011, common stock equivalents consisting of 1,000,000 outstanding warrants were not considered in the calculation of the weighted average number of common shares outstanding for diluted EPS, as they would be anti-dilutive, thereby decreasing the net loss per common share.
Recent Accounting Pronouncements
The Company’s management does not believe that recent codified pronouncements by the FASB will have a material impact on the Company’s current or future financial statements.
(4) Equity Transactions
Effective August 18, 2011, the Company registered 1,750,000 shares of the Company’s common stock under the Bella Petrella’s Holdings, Inc. 2011a Stock Compensation Program. The details of the registration may be found in Form S-8 as filed with the Securities and Exchange Commission. The purpose of the program is to allow the Company to compensate the program participants as listed below in shares of Bella Petrella’s Holdings, Inc. common stock for services rendered and to be rendered. There are no resale restrictions on the resale of common stock received under the plan.
The participants are:
John V. Whitman, Jr., director and chief executive officer
Jackson L. Morris, securities counsel
Daniel Chasse, consultant
10
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
(4) Equity Transactions (continued)
On August 31, 2011, the Company issued 500,000 shares of common stock to the Company’s CEO, in payment for services under the previously mentioned stock compensation program The payment was for services rendered February 11, 2011 to August 11, 2011. The valuation of the stock at the time of the payment was $.25 per share based on bid prices and resulted in a total compensation of $125,000 for the six month period.
On August 18, 2011, the Company issued 250,000 shares of common stock to Jackson Morris, the Company’s securities attorney, in exchange for services under the previously mentioned stock compensation program started August 11, 2011. The payment is a prepayment of services for the period June 1, 2011 to May 31, 2013. The shares were valued at $.25 per share based on bid prices and resulted in a total prepaid compensation of $62,500.
On August 5, 2011, the Company entered into a consulting agreement with Daniel Chasse for services including developing marketing strategies for franchises, identifying and qualifying potential franchisees, evaluating potential franchisees for competency and experience in the restaurant business and assessing and evaluating demographic requirements for franchising. The Company issued 1,000,000 shares of the Company’s common stock under the Bella Petrella’s Holdings, Inc. 2011a Stock Compensation Program as compensation for services under the agreement. The agreement is for a period of one year. The stock was valued at $.17 per share for a total of $170,000.
On August 26, 2011, the Company entered into a consulting contract with a third party for general business consulting services. The consultant received 250,000 shares of common stock of the Company in exchange for the services to be provided under the contract. The stock was valued at $.25 per share for a total of $62,500.
On July 25, 2011, the Company issued 360,000 shares of restricted common stock to the owner of Bobby V’s Original Westshore Pizza, LLC and Philly Westshore Franchising Enterprises, Inc as inducement to close the transactions described previously in this disclosure. The stock was valued at $.25 per share for a total of $90,000.
(5) Concentrations
The Company does a significant amount of its total business with one customer. This customer comprises 99% and 98% of total revenues for the Company’s products for the three month periods ended August 31, 2011 and 2010 respectively.
The Company outsources 100% of its product manufacturing to one manufacturer. However, the Company believes other manufacturing options are available.
11
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
(6) Contingencies and Commitments
In connection with the stock purchase by JVW Entertainment, Inc., the Company has entered into a Consulting Services Agreement and Agreement Not to Compete with Joseph M. Petrella, Jr., one of the Company’s founders. The Consulting Services Agreement is for a period of five (5) years with cash payments made every two weeks totaling $75,000 per year . The agreement also calls for common stock purchase warrants to be issued in the total amount of 1,000,000 shares, exercisable for four years beginning one year after the date of the consulting agreement. The exercise amounts and prices are as follows:
200,000 shares at $0.50/share
200,000 shares at $2.00/share
200,000 shares at $0.75/share
200,000 shares at $3.00/share
200,000 shares at $1.00/share
Mr. Petrella, Jr, also entered into a non-compete agreement with the Company. No value was assigned to the non-compete agreement due to disincentives to break the non-compete, such as the Consulting Services Agreement and the seller’s continuing ownership interest in the Company.
(7) Related Party Transactions
In connection with a Consulting Services Agreement with Mr. Petrella, Jr., the Company has recorded a liability in the amount of $108,924 and $90,174, as of August 31, 2011 and May 31, 2011, which is included in accounts payable in the accompanying balance sheets.
During the three months ended August 31, 2011 and the three months ended August 31, 2010, the Company incurred $5,444, and $5,307, respectively, in commissions to Mr. Petrella, Jr.. These commissions are included in general and administrative expenses in the accompanying statement of operations. The commissions paid and accrued and common stock issued to Joseph M. Petrella, Jr., during the periods were considered reasonable compensation for his selling and administrative services during the period.
During the three months ended August 31, 2011, JVW Entertainment. Inc. paid approximately $2,800 in Company expenses which were recorded as additional paid in capital. During the twelve months ended May 31, 2011, JVW Entertainment, Inc. advanced approximately $214,383 to the Company in payment of Company expenses, $70,689 of which was recorded as payment for purchase of common stock, with $143,694 being recorded as additional paid in capital.
Accrued Executive Compensation at August 31, 2011 represents compensation owed to John V. Whitman, Jr., CEO, Bobby Dollar, CFO, Kenneth L. Shartz, Vice President Retail Sales, and Joseph M. Petrella, III, Vice President Institutional Sales. Compensation was paid to Mr. Whitman in Company common stock issued on August 31, 2011 for services rendered through August 11, 2011.
12
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
(8) Subsequent Events
The Company entered into the following three material contracts, effective September 2, 2011. The Company closed the transactions in the first two of the three material contracts, effective September 2, 2011. The Company will defer closing the third material contract until funding is obtained to pay the secured promissory notes issued to close the first two material contracts and to close the third material contract for cash.
1.
The Company purchased Bobby V’s Original Westshore Pizza, LLC at a price of $1,110,000, which was paid with the Company promissory note due October 31, 2011, secured by the members’ interests in the acquired Company. The maturity date of the note is subject to two extensions, the last being through August 31, 2013, and can be paid by issue of shares of the Company’s common stock, at the election of the note holders. The note was extended to December 31, 2011 on October 13, 2011, with the issuance of the 500,000 shares of Company common stock as discussed in item 2, below.
2.
The Company purchased Philly Westshore Franchising Enterprises, Inc. at a price of $2,590,000, which was paid with a promissory note due October 31, 2011, secured by the common stock in the acquired Company. The maturity date of the note is subject to two extensions, the last being through August 31, 2013, and can be paid by shares of the Company’s common stock, at the election of the holders. On October 13, 2011, the first extension was granted through December 31, 2011, in exchange for 500,000 shares of the Company’s common stock, which were issued on October 13, 2011.
3.
The Company signed a contract to purchase Vasaturo Holdings LLC at a price of $800,000. The Company expects to close this transaction when financing is obtained.
The Company acquired 100% of the voting interest of these Westshore companies as part of its strategy to make acquisitions that provide vertical integration with its current products. The Company also believes the acquisitions provide revenue and expansion potential.
The Company has not presented unaudited proforma information of the results of the Company for the periods ended August 31, 2011 and August 31, 2010 as if these acquistions had taken place at the beginning of the periods presented. This information is not currently available.
Bobby V’s Original Westshore Pizza LLC operates one 83 seat pizza and sandwich sports bar in Tampa, Florida. The restaurant was founded in 1994. Unaudited gross revenues of the restaurant’s most recently ended 2010 fiscal year were approximately $1,519,000.
13
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
(8) Subsequent Events (continued)
Philly Westshore Franchising Enterprises, Inc. franchises to others pizza and sandwich sports bars primarily in Florida and Ohio. Audited gross revenues of the business’ most recently ended 2010 fiscal year were approximately $731,000.
Vasaturo Holdings LLC owns the real estate leased to Bobby V’s Original Philly Westshore Pizza, Inc., a 14,560 square foot lot in Southwest Tampa, Florida with a 3,600 square foot commercial building used by the restaurant and as executive offices for all three enterprises. Annual rent received from the tenant is $60,000 per year.
The Company has employed the prior owner to continue management of Bobby V’s Original Philly Westshore Pizza and Philly Westshore, and he will manage Vasaturo Holdings after closing. The employment contract is for 7 years and calls for an initial annual salary of $450,000 in the aggregate until the notes given in purchase of the subsidiaries are paid and salary of $150,000 per year after the payment of the notes.
The Company subsidiary, Philly Westshore Franchising Enterprises, Inc., (Philly) entered into a Territory Representative Agreement for the State of Georgia on September 25, 2011. Under the agreement, Philly appointed Westshore Georgia, Inc. for a term of ten years, subject to extension, as the exclusive representative to market and sell franchises for Philly’s pizza and sandwich sports bar restaurants and to open franchised pizza and sandwich sports bar restaurants. Philly received an “area development fee” of $30,000 for the appointment. Franchisees obtained by Westshore Georgia must enter into franchise agreements with Philly for any restaurants they intend to open and operate. Westshore Georgia must also enter into franchise agreements with Philly for any restaurants it intends to open and operate. Westshore Georgia is required under the agreement to sell franchises as Philly’s representative and/or open one pizza and sandwich sports bar restaurant each year during the ten year term of the agreement.
Concurrent with the appointment of Westshore Georgia as territory representative for the State of Georgia, Philly entered into a franchise agreement with it for one pizza and sandwich sports bar restaurant to be developed and opened at a location in Georgia subject to Philly’s approval within 180 days. Philly received a nonrecurring and non-refundable fee of $30,000 for the agreement. Operation of the franchise is subject to Philly’s normal ongoing franchise fee payments.
Subsequent to August 31, 2011, a shareholder of the Company paid accounting fees to the Company’s auditors of $55,888. The shareholder will receive 200,000 restricted shares of the Company’s common stock with no registration rights in exchange for the payment, a valuation of approximately $.28 per share.
14
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
(8) Subsequent Events (continued)
On September 12, 2011, the company issued 250,000 shares of common stock to an individual as incentive to assist the company in finding sources of capital. No contract between the company and the individual currently exists.
15
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
We are an early revenue stage company, engaged in the sale of pasta sauces and salsas. Subsequent to our fiscal quarter end, we purchased a pizza and sandwich sports bar and a company that franchises pizza and sandwich sports bar restaurants.
Since our inception on July 28, 2009 through August 31, 2011 we have generated revenues of $219,447 and incurred a net loss of $1,104,694. We believe that our low corporate expense burden and our acquisition of a pizza and sandwich sports bar restaurant and apizza and sports bar restaurant franchising company will improve revenues and lead to improvements in overall operating results. We also believe that our marketing plan for our pasta sauce products, focusing on institutional sales, will substantially reduce the advertising expenses and promotion expenses required for more traditional retail outlets, such as grocery stores. We believe that we will be able to build volume in institutional sales over the next twelve months due to the reduced acid content of our sauces and salsas, as compared to other brands of tomato based sauces, providing protection from heartburn and acid reflux, as well as our all natural ingredients and homemade flavor. You have no assurance that the actual expenses we incur will not materially exceed our estimates or that cash flows from our business will be adequate to maintain our operations.
The operating activity in the periods ended August 31, 2011 and August 31, 2010 was limited to organizational expenses and revenues and expenses related sales primarily to Ferraro Foods and Lisanti Foods, institutional food distributors to Famous Famiglias Pizzerias.
Even though we realized a modest gross profit in the periods ended August 31, 2011 and 2010, we had operating losses of $167,804 and $164,199 respectively. As a result of consulting fees and other expenses paid by JVW Entertainment, Inc., we experienced non-cash expenses in the period ended August 31, 2010 of $93,093. We have also experienced non-cash expenses in the period ended August 31, 2011 of $140,591, consisting primarily of “Share-Based Compensation” to the CEO and to consultants. We have experienced several periods of capital formation and operating losses which management believes are normal for a new business. Our management believes we can achieve economies of scale by applying fixed operating costs to more than one product and through lower increments in production costs for additional product sales both retail and wholesale.
Revenues
Revenues totaled $34,083 for the three months ended August 31, 2011 as compared to $27,795 for the three months endedAugust 31, 2010. Our sales were primarily to Ferraro Foods and Lisanti, institutional food distributors to Famous Famiglias Pizzerias. Sales to Ferraro Foodsand Lisanti comprised ninety-nine percent of our revenues for the August 31, 2011 period and ninety-eight percent for the August 31, 2010 period. These revenues were from sales of our Alfredo sauce and Spicy Salsas.
16
We expect our sales to increase by approximately $3,000,000 or 2,393% for fiscal year ending May 31, 2012 as we expand our marketing efforts for institutional sales of our sauces and salsas, subject to funding, and as a result of our purchase on September 2, 1011of our pizza and sports bar restaurant, which had unaudited gross revenues of approximately $1,519,000 in their 2010 year; and of our restaurant franchising business, which had audited revenues of approximately $731,000 in its 2010 fiscal year. Planned expansion of the franchise operations is expected to grow by twenty-two stores over the next ten-years. On September 25, 2011 a territory agreement was entered into which requires the territory owner to open ten stores in Georgia over the next ten-years. We plan to realign operations of our franchise stores in Florida to optimize revenues. We are engaged in negotiations for potential territory franchise agreements in Texas, California and Nevada.
Expenses
Operating expenses totaled $175,209 for the three months ended August 31, 2011 compared to $169,241 for the three months endedAugust 31, 2010. The increase in expenses was primarily due to accrued executive salaries.
Liquidity and Capital Resources
As of August 31, 2011, our cash balance was $388. The Statements of Cash Flows provide information about our net cash flow for the financial statement periods presented in this quarterly report. To date, we have financed our operations through the issuance of stock and contributions to capital by JVW Entertainment, Inc.
We expect our liquidity to improve during the 2012 fiscal year based on our recent acquisitions and funding for continuing operations we believe may be available based on our projected revenue growth.
Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. Our liquidity to date has been limited to proceeds from the sale of our products and contributions to our capital by JVW Entertainment, Inc. We have no assurance as to how much or for how long JVW Entertainment, Inc. will have the financial ability to continue funding our working capital needs. We do not have a binding agreement that requires our JVW Entertainment, Inc. to make further contributions of capital or provide any other form of funding. We believe cash flow generated from the sale of our products will be sufficient to sustain current operations; but, product sales alone will not generate sufficient profits to implement our plan of operations. To fully implement our plan of operations, we expect to require $10,000,000 over the next thirty-six months. In the event we require additional capital to fund operations and growth, we may need to sell securities in private placements or obtain debt funding. There is no assurance we will be able to make private sales of our securities or obtain debt funding, if we should have a need so to do.
17
The following table provides information about the recent acquisitions of our subsidiaries. More information about the transactions is available in our report on Form 8-K filed on September 6, 2011.
Name of Subsidiary
Note Amount
Due Date
First Extension(1)
Second Extension(2)
Bobby V’s Original Westshore Pizza
$1,106,302
10/31/2011
12/31/2011
08/31/2012
Philly Westshore Franchising Enterprises
$2,581,372
10/31/2011
12/31/2011
08/3/2012
(1) Extension granted, in consideration of 500,000 shares of common stock to be issued.
(2) Extension may be granted in the sole discretion of holder, in consideration of 1,000,000 shares of common stock.
We are currently in talks with several equity participants to secure the $4.5 million we need to pay the notes we have issued to purchase our subsidiaries and to close the purchase the real estate on which our Tampa restaurant is located. You have no assurance we will be successful in its efforts to obtain the needed equity financing. Our noteholders have the right to extend the due dates on the notes and have granted the first of two extensions. If we are unable to pay the notes by the extended due dates and the note holders do not grant the second extension, we would lose ownership of our subsidiaries.
Critical Accounting Policies and Estimates
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, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported revenues and expenses during the period. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Estimates that are critical to the accompanying financial statements include estimates related to classification of expenditures as either an asset or expense, and the likelihood of loss contingencies. Management bases its estimates and judgments on experience, which is limited at this time, and on various other factors that it believes 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. Management revises estimates and assumptions periodically and the effects of revisions are reflected in the financial statements in the period during which it is determined to be necessary. Actual results may differ materially from these estimates under different assumptions or conditions.
18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
307 – Disclosure controls and procedures: As of August 31, 2011, May 31, 2011, our management carried out an evaluation of the effectiveness of disclosure controls and procedures, with the participation of our principal executive and principal financial officers. Disclosure controls and procedures are defined in Exchange Act Rule 15d–15(e) as “controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms and include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.” Based on our evaluation, our chief executive officer and chief financial officer have concluded that, as of May 31, 2011 and August31, 2011, we did not have effective disclosure controls and procedures.
The primary reason for our management’s conclusions is that we did not have a plan in place for implementing controls and procedures nor did we have sufficient personnel to implement checks and balances. We believe that we will have sufficient funds available to develop a plan in the foreseeable future. We do anticipate that our business will need sufficient personnel in the foreseeable future that are needed to implement checks and balances.
308(b) – Changes in internal control over financial reporting: Based upon an evaluation by our management of our internal control over financial reporting, with the participation of our principal executive and principal financial officers, there were no changes made in our internal control over financial reporting during the period ended August 31, 2011 and May31, 2011 that have materially affected or are reasonably likely to materially affect this control.
Limitations on the Effectiveness of Internal Control: Our management does not expect that our disclosure controls and procedures, if any, or our internal controls over financial reporting, if any, will necessarily prevent all fraud and material errors. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations on all internal control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, and/or by management override of the control. The design of any system of internal control is also based in part upon certain assumptions about risks and the likelihood of future events, and there is no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in circumstances and the degree of compliance with the policies and procedures may deteriorate. Because of the inherent limitations in a cost-effective internal control system, financial reporting misstatements due to error or fraud may occur and not be detected on a timely basis.
19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not engaged in any litigation at the date of this report and do not expect to be engaged in litigation of a routine nature in the future.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We sold 1,000 shares of common stock for $1.00 per share during the three month period ended August 31, 2011. These shares were sold directly to the purchaser. We did not utilize the services of a broker, or did we pay any commission or other compensation in connection with the sale. We have relied on Section 4(2) of the Securities Act for an exemption from registration.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. REMOVED AND RESERVED BY THE COMMISSION
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS
The following exhibits are attached to this report:
Exhibit
Number
Description
31.1
Rule 15d-14 (a) Certification by Principal Executive and Principal Operating Officer
31.2
Rule 15d-14 (a) Certification by Principal Financial and Principal Accounting Officer
32
Section 1350 Certification of Principal Executive and Principal Operating Officer and Principal Financial Principal Accounting Officer
20
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Bella Petrella’s Holdings, Inc.
Date: October 25, 2011
By:
/s/ John V. Whitman, Jr.
John V. Whitman, Jr., Chief Executive Officer
(Principal Executive and Principal Operating Officer)
/s/ Robert S. Dollar
Robert S. Dollar, Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
21
EXHIBIT 31.1
CERTIFICATION
I, John V. Whitman, Jr., certify that:
1.
I have reviewed this Form 10-Q/A for the fiscal quarter ended August 31, 2011, of Bella Petrella’s Holdings, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4.
The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal year (the small business issuer's fourth fiscal year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5.
The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
Date: October 25, 2011
By:
/s/ John V. Whitman, Jr.
John V. Whitman, Jr., Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
CERTIFICATION
I, Robert S. Dollar, certify that:
1.
I have reviewed this Form 10-Q/A for the fiscal quarter ended August 31, 2011 of Bella Petrella’s Holdings, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4.
The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal year (the small business issuer's fourth fiscal year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5.
The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
Date: October 25, 2011
/s/ Robert S. Dollar
Robert S. Dollar, Chief Financial Officer
(Principal Financial Officer)
EXHIBIT 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the report of Bella Petrella’s Holdings, Inc. (the "Company") on Form 10-Q/A for the fiscal quarter ended August 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned principal executive officer and the principal financial officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: October 25, 2011
By:
/s/ John V. Whitman, Jr.
John V. Whitman, Jr., Chief Executive Officer
(Principal Executive and Principal Operating Officer)
/s/ Robert S. Dollar
Robert S. Dollar, Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
Washington, D.C. 20549
FORM 10-Q/A
(amended October 25, 2011)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2011 [First Quarter]
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
COMMISSION FILE NO. 333-169145
BELLA PETRELLA’S HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Florida
27-0645694
State or other jurisdiction of
incorporation or organization
I.R.S. Employer Identification No.
109 South Edison Avenue
Tampa, Florida
33606
(Address of principal executive offices)
(Zip code)
Issuer’s telephone number: 516-375-6649
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act : None
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 requirements for the past 90 days.
YES þ
NO o
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 o
NO þ
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o
NO þ
The number of shares outstanding of each of the issuer’s classes of common stock at October14, 2011 was 20,041,600 shares of $0.01 par value common stock.
TABLE OF CONTENTS
PAGE
Part I - Financial Information
Item 1.
Financial Statements (Unaudited)
4
Balance Sheets
5
Statements Of Operations
6
Statements Of Cash Flows
7
Notes To The Financial Statements
8
Item 2.
Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
16
Item 3.
Quantitative And Qualitative Disclosures About Market Risk
19
Item 4.
Controls And Procedures
19
Part II - Other Information
Item 1.
Legal Proceedings
20
Item 2.
Unregistered Sales Of Equity Securities And Use Of Proceeds
20
Item 3.
Defaults Upon Senior Securities
20
Item 4.
Removed and Reserved by Commission
20
Item 5.
Other Information
20
Item 6.
Exhibits
20
2
SUMMARIES OF REFERENCED DOCUMENTS
This quarterly report on Form 10–Q contains references to, summaries of and selected information from material agreements and other documents. These agreements and documents are not incorporated by reference; but, they are filed as exhibits to this annual report or to other reports we have filed with the U.S. Securities and Exchange Commission. Whenever we make reference in this annual report to any of our material agreements and other documents, the summaries and selected information do not necessarily contain all of the terms and conditions of the material agreements and other documents. The summaries of and selected information from those material agreements and other documents are qualified in their entirety by the complete agreements and other documents. You may obtain the full text of the material agreements and other documents from the Public Reference Section of or online from the Commission.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10–Q may include “forward–looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. We intend the forward–looking statements to be covered by the safe harbor provisions for forward–looking statements as described in that section.
This quarterly report contains forward-looking statements that involve risks and uncertainties. We use words such as “project”, “believe”, “anticipate”, “plan”, “expect”, “estimate”, “intend”, “should”, “would”, “could”, or “may”, or other such words, verbs in the future tense and words and phrases that convey similar meaning and uncertainty of future events or outcomes to identify these forward-looking statements. There are a number of important factors beyond our control that could cause actual results to differ materially from the results anticipated by these forward-looking statements. While we make these forward–looking statements based on various factors and using numerous assumptions, we have no assurance the factors and assumptions will prove to be materially accurate when the events they anticipate actually occur in the future.
The forward-looking statements are based upon our beliefs and assumptions using information available at the time the statements are made. We caution you not to place undue reliance on our forward-looking statements as (i) these statements are neither predictions nor guaranties of future events or circumstances, and (ii) the assumptions, beliefs, expectations, forecasts and projections about future events may differ materially from actual results. We undertake no obligation to publicly update any forward-looking statement to reflect developments occurring after the date of this quarterly report.
Use of Pronouns and Other Words
The pronouns “we”, “us”, “our” and the equivalent mean Bella Pretella’s Holdings, Inc. and our consolidated subsidiaries. In the notes to our financial statements, the “Company” means Bella Petrella’s Holdings, Inc. and our consolidated subsidiaries The pronoun “you” means the reader of this quarterly report on Form 10-Q.
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEX
FINANCIAL STATEMENTS OF
BELLA PETRELLA’S HOLDINGS, INC.
Page
Balance Sheets at August31, 2011(Unaudited) and May 31, 2011
5
Statements of Operations For the Three Months Ended August31, 2011 (Unaudited) and August31, 2010 (Unaudited)
6
Statements of Cash Flows For the Three months Ended August 31, 2011 (Unaudited) and August 31, 2010 (Unaudited)
7
Notes to Financial Statements (Unaudited)
8
4
Bella Petrella's Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Balance Sheets
August 31, 2011
May 31, 2011
(Unaudited)
Assets
Current Assets
Cash in Bank
$ 388 $ 193
Accounts Receivable
9,604 -
Prepaid Expenses
453,771 100,000
Total Current Assets
463,763 100,193
Other Assets
Prepaid Expenses
23,438 -
Trademarks
5,000 5,000
Total Other Assets
28,438 5,000
Total Assets
$ 492,201 $ 105,193
Liabilities and Shareholders' Equity (Deficit)
Current Liabilities
Accrued Executive Compensation
$ 121,171 $ 123,158
Accounts Payable (including related party balance of $108,924 and
$90,174 at August 31, 2011 and May 31, 2011, respectively)
172,681 134,682
Total Liabilities
293,852 257,840
Shareholders' Equity (Deficit)
Common Stock, $0.01 par value; 500,000,000 shares authorized;
19,236,600 and 16,855,600 shares issued and outstanding at
August 31, 2011 and May 31, 2011, respectively
192,366 168,556
Additional Paid-in Capital
1,110,677 615,687
Accumulated Deficit
(1,104,694 ) (936,890 )
Total Shareholders' Equity (Deficit)
198,349 (152,647 )
Total Liabilities and Shareholders' Equity
$ 492,201 $ 105,193
See accompanying notes to financial statements.
5
Bella Petrella's Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Statements of Operations
Three Months Ended August 31, 2011
Three Months Ended August 31, 2010
(Unaudited)
(Unaudited)
Revenues
Sales
$ 34,083 $ 27,795
Cost of Sales
Cost of Goods Sold
26,678 22,753
Gross Profit
7,405 5,042
Expenses
General and Administrative Expenses
175,209 169,241
Net Loss
$ (167,804 ) $ (164,199 )
Basic and diluted loss per share
$ (0.01 ) $ (0.01 )
Basic and diluted weighted average common
shares outstanding
17,353,369 15,859,948
See accompanying notes to financial statements.
6
Bella Petrella's Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Statements of Cash Flows
Three Months
Three Months
Ended
Ended
August 31, 2011
August 31, 2010
Cash flows from operating activities:
(Unaudited)
(Unaudited)
Net loss
$ (167,804 ) $ (164,199 )
Adjustments to reconcile net loss to net
cash (used) by operating activities:
Non-cash expenses
140,591 93,093
Changes in assets and liabilities:
Accounts Receivable
(9,604 ) 11,405
Inventory
- 339
Prepaid Expenses
- 37,471
Accrued Executive Compensation
(1,987 ) -
Accounts Payable
37,999 21,876
Net cash (used) by operating activities
(805 ) (15 )
Cash flows from financing activities:
Sale of common stock
1,000 -
Net cash provided by financing activities
1,000 -
Net increase (decrease) in cash
195 (15 )
Cash at beginning of period
193 298
Cash at end of period
$ 388 $ 283
Supplemental disclosures of non-cash investing and
financing activities:
Stock issued in exchange for payment of expenses by JVW Entertainment, Inc.
$ - $ 15,000
Common Stock issued in exchange for letter of intent
$ 90,000 $ -
Common Stock issued for services
$ 130,000 $ 250,000
Common Stock issued for prepayment of services
$ 295,000 $ -
Capital contribution for payment of expenses by JVW Entertainment
$ 2,800 $ -
See accompanying notes to financial statements.
7
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
.
(1) Nature of Business
Bella Petrella’s Holdings, Inc. (the "Company") is a marketing Company, incorporated in Florida on July 28, 2009. The Company sells its own line of gourmet pasta sauces and salsas. The Company’s principal assets are the 100% owned recipes developed by one of its founder.
(2) Basis of Presentation and Going Concern
While the information presented in the accompanying interim condensed financial statements is unaudited, it includes all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with accounting principles generally accepted in the United States of America. These interim financial statements follow the same accounting policies and methods of application as used in the May 31, 2011 audited financial statements of the Company. All adjustments are of a normal, recurring nature. Interim financial statements and the notes thereto do not contain all of the disclosures normally found in year-end audited financial statements, and these Notes to Interim Condensed Financial Statements are abbreviated and contain only certain disclosures related to the three months period ended August 31, 2011. It is suggested that these interim financial statements be read in conjunction with the Company’s period-end audited May 31, 2011 financial statements. Operating results for the three month period ended August 31, 2011 are not necessarily indicative of the results that can be expected for the year ending May 31, 2012.
The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. Should the Company be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due.
The Company has incurred net losses during the three months ended August 31, 2011 and 2010 of $167,804 and $164,199. respectively. In addition, the Company has no significant revenue-generating operations. To continue as a going concern, the Company plans to raise funds through private placements and public stock offerings. These funds will be used for marketing and payment of general and administrative expenses. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern.
(3) Significant Accounting Policies
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, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported revenues and expenses during the period. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Estimates that are critical to the accompanying financial statements include estimates related to classification of expenditures as either an asset or expense, valuation of deferred tax assets, and the likelihood of loss contingencies. Management bases its estimates and judgments on experience and on various other factors 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. Estimates and assumptions are revised periodically and the effects of revisions are reflected in the financial statements in the period it is determined to be necessary. Actual results may differ materially from these estimates under different assumptions or conditions.
8
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
(3) Significant Accounting Policies (continued)
Revenue Recognition
The Company accounts for revenue recognition in accordance with the Securities and Exchange Commission Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101) and FASB ASC 605 Revenue Recognition. The Company recognizes revenue when rights and risk of ownership have passed to the customer, when there is persuasive evidence of an arrangement, product has been shipped or delivered to the customer, the price and terms are finalized, and collections of resulting receivable is reasonably assured. Products are primarily shipped FOB shipping point at which time title passes to the customer.
The Company’s products are primarily sold to resellers and therefore the Company does not collect sales taxes.
Share-Based Compensation
U.S. GAAP requires companies to measure the cost of employee services received in exchange for the award of equity instruments based on the fair value of the award at the date of grant. The expense is to be recognized over the period during which an employee is required to provide services in exchange for the award.
The Company accounts for common stock warrants granted based on the fair market value of the instrument using the Black-Scholes option pricing model utilizing certain weighted average assumptions such as expected stock price volatility, term of the options and warrants, risk-free interest rates, and expected dividend yield at the grant date. Because the Company's common stock is not traded publicly, expected stock price volatility is based on a calculated value which was determined through the weighted average stock price volatilities of appropriate peer companies. The expected term of the warrants granted is equal to the estimated life of the warrants. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of the stock options. The Company does not expect to pay any dividends.
Income Taxes
Deferred taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and
deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates.
9
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
(3) Significant Accounting Policies (continued)
Income Taxes (continued)
Certain guidance located within Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 740, "Income Taxes" (“ASC Topic 740”), clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC Topic 740 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740 also provides guidance on the recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. The Company had no uncertain tax positions for the three months ended August 31, 2011 or three months ended August 31, 2010.
Net Loss Per Share
Basic loss per common share is computed based on weighted average shares outstanding and excludes any potential dilution from stock options, options and other common stock equivalents; this metric is computed by dividing loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (i.e., options) were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. For the periods ended August 31, 2011 and May 31, 2011, common stock equivalents consisting of 1,000,000 outstanding warrants were not considered in the calculation of the weighted average number of common shares outstanding for diluted EPS, as they would be anti-dilutive, thereby decreasing the net loss per common share.
Recent Accounting Pronouncements
The Company’s management does not believe that recent codified pronouncements by the FASB will have a material impact on the Company’s current or future financial statements.
(4) Equity Transactions
Effective August 18, 2011, the Company registered 1,750,000 shares of the Company’s common stock under the Bella Petrella’s Holdings, Inc. 2011a Stock Compensation Program. The details of the registration may be found in Form S-8 as filed with the Securities and Exchange Commission. The purpose of the program is to allow the Company to compensate the program participants as listed below in shares of Bella Petrella’s Holdings, Inc. common stock for services rendered and to be rendered. There are no resale restrictions on the resale of common stock received under the plan.
The participants are:
John V. Whitman, Jr., director and chief executive officer
Jackson L. Morris, securities counsel
Daniel Chasse, consultant
10
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
(4) Equity Transactions (continued)
On August 31, 2011, the Company issued 500,000 shares of common stock to the Company’s CEO, in payment for services under the previously mentioned stock compensation program The payment was for services rendered February 11, 2011 to August 11, 2011. The valuation of the stock at the time of the payment was $.25 per share based on bid prices and resulted in a total compensation of $125,000 for the six month period.
On August 18, 2011, the Company issued 250,000 shares of common stock to Jackson Morris, the Company’s securities attorney, in exchange for services under the previously mentioned stock compensation program started August 11, 2011. The payment is a prepayment of services for the period June 1, 2011 to May 31, 2013. The shares were valued at $.25 per share based on bid prices and resulted in a total prepaid compensation of $62,500.
On August 5, 2011, the Company entered into a consulting agreement with Daniel Chasse for services including developing marketing strategies for franchises, identifying and qualifying potential franchisees, evaluating potential franchisees for competency and experience in the restaurant business and assessing and evaluating demographic requirements for franchising. The Company issued 1,000,000 shares of the Company’s common stock under the Bella Petrella’s Holdings, Inc. 2011a Stock Compensation Program as compensation for services under the agreement. The agreement is for a period of one year. The stock was valued at $.17 per share for a total of $170,000.
On August 26, 2011, the Company entered into a consulting contract with a third party for general business consulting services. The consultant received 250,000 shares of common stock of the Company in exchange for the services to be provided under the contract. The stock was valued at $.25 per share for a total of $62,500.
On July 25, 2011, the Company issued 360,000 shares of restricted common stock to the owner of Bobby V’s Original Westshore Pizza, LLC and Philly Westshore Franchising Enterprises, Inc as inducement to close the transactions described previously in this disclosure. The stock was valued at $.25 per share for a total of $90,000.
(5) Concentrations
The Company does a significant amount of its total business with one customer. This customer comprises 99% and 98% of total revenues for the Company’s products for the three month periods ended August 31, 2011 and 2010 respectively.
The Company outsources 100% of its product manufacturing to one manufacturer. However, the Company believes other manufacturing options are available.
11
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
(6) Contingencies and Commitments
In connection with the stock purchase by JVW Entertainment, Inc., the Company has entered into a Consulting Services Agreement and Agreement Not to Compete with Joseph M. Petrella, Jr., one of the Company’s founders. The Consulting Services Agreement is for a period of five (5) years with cash payments made every two weeks totaling $75,000 per year . The agreement also calls for common stock purchase warrants to be issued in the total amount of 1,000,000 shares, exercisable for four years beginning one year after the date of the consulting agreement. The exercise amounts and prices are as follows:
200,000 shares at $0.50/share
200,000 shares at $2.00/share
200,000 shares at $0.75/share
200,000 shares at $3.00/share
200,000 shares at $1.00/share
Mr. Petrella, Jr, also entered into a non-compete agreement with the Company. No value was assigned to the non-compete agreement due to disincentives to break the non-compete, such as the Consulting Services Agreement and the seller’s continuing ownership interest in the Company.
(7) Related Party Transactions
In connection with a Consulting Services Agreement with Mr. Petrella, Jr., the Company has recorded a liability in the amount of $108,924 and $90,174, as of August 31, 2011 and May 31, 2011, which is included in accounts payable in the accompanying balance sheets.
During the three months ended August 31, 2011 and the three months ended August 31, 2010, the Company incurred $5,444, and $5,307, respectively, in commissions to Mr. Petrella, Jr.. These commissions are included in general and administrative expenses in the accompanying statement of operations. The commissions paid and accrued and common stock issued to Joseph M. Petrella, Jr., during the periods were considered reasonable compensation for his selling and administrative services during the period.
During the three months ended August 31, 2011, JVW Entertainment. Inc. paid approximately $2,800 in Company expenses which were recorded as additional paid in capital. During the twelve months ended May 31, 2011, JVW Entertainment, Inc. advanced approximately $214,383 to the Company in payment of Company expenses, $70,689 of which was recorded as payment for purchase of common stock, with $143,694 being recorded as additional paid in capital.
Accrued Executive Compensation at August 31, 2011 represents compensation owed to John V. Whitman, Jr., CEO, Bobby Dollar, CFO, Kenneth L. Shartz, Vice President Retail Sales, and Joseph M. Petrella, III, Vice President Institutional Sales. Compensation was paid to Mr. Whitman in Company common stock issued on August 31, 2011 for services rendered through August 11, 2011.
12
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
(8) Subsequent Events
The Company entered into the following three material contracts, effective September 2, 2011. The Company closed the transactions in the first two of the three material contracts, effective September 2, 2011. The Company will defer closing the third material contract until funding is obtained to pay the secured promissory notes issued to close the first two material contracts and to close the third material contract for cash.
1.
The Company purchased Bobby V’s Original Westshore Pizza, LLC at a price of $1,110,000, which was paid with the Company promissory note due October 31, 2011, secured by the members’ interests in the acquired Company. The maturity date of the note is subject to two extensions, the last being through August 31, 2013, and can be paid by issue of shares of the Company’s common stock, at the election of the note holders. The note was extended to December 31, 2011 on October 13, 2011, with the issuance of the 500,000 shares of Company common stock as discussed in item 2, below.
2.
The Company purchased Philly Westshore Franchising Enterprises, Inc. at a price of $2,590,000, which was paid with a promissory note due October 31, 2011, secured by the common stock in the acquired Company. The maturity date of the note is subject to two extensions, the last being through August 31, 2013, and can be paid by shares of the Company’s common stock, at the election of the holders. On October 13, 2011, the first extension was granted through December 31, 2011, in exchange for 500,000 shares of the Company’s common stock, which were issued on October 13, 2011.
3.
The Company signed a contract to purchase Vasaturo Holdings LLC at a price of $800,000. The Company expects to close this transaction when financing is obtained.
The Company acquired 100% of the voting interest of these Westshore companies as part of its strategy to make acquisitions that provide vertical integration with its current products. The Company also believes the acquisitions provide revenue and expansion potential.
The Company has not presented unaudited proforma information of the results of the Company for the periods ended August 31, 2011 and August 31, 2010 as if these acquistions had taken place at the beginning of the periods presented. This information is not currently available.
Bobby V’s Original Westshore Pizza LLC operates one 83 seat pizza and sandwich sports bar in Tampa, Florida. The restaurant was founded in 1994. Unaudited gross revenues of the restaurant’s most recently ended 2010 fiscal year were approximately $1,519,000.
13
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
(8) Subsequent Events (continued)
Philly Westshore Franchising Enterprises, Inc. franchises to others pizza and sandwich sports bars primarily in Florida and Ohio. Audited gross revenues of the business’ most recently ended 2010 fiscal year were approximately $731,000.
Vasaturo Holdings LLC owns the real estate leased to Bobby V’s Original Philly Westshore Pizza, Inc., a 14,560 square foot lot in Southwest Tampa, Florida with a 3,600 square foot commercial building used by the restaurant and as executive offices for all three enterprises. Annual rent received from the tenant is $60,000 per year.
The Company has employed the prior owner to continue management of Bobby V’s Original Philly Westshore Pizza and Philly Westshore, and he will manage Vasaturo Holdings after closing. The employment contract is for 7 years and calls for an initial annual salary of $450,000 in the aggregate until the notes given in purchase of the subsidiaries are paid and salary of $150,000 per year after the payment of the notes.
The Company subsidiary, Philly Westshore Franchising Enterprises, Inc., (Philly) entered into a Territory Representative Agreement for the State of Georgia on September 25, 2011. Under the agreement, Philly appointed Westshore Georgia, Inc. for a term of ten years, subject to extension, as the exclusive representative to market and sell franchises for Philly’s pizza and sandwich sports bar restaurants and to open franchised pizza and sandwich sports bar restaurants. Philly received an “area development fee” of $30,000 for the appointment. Franchisees obtained by Westshore Georgia must enter into franchise agreements with Philly for any restaurants they intend to open and operate. Westshore Georgia must also enter into franchise agreements with Philly for any restaurants it intends to open and operate. Westshore Georgia is required under the agreement to sell franchises as Philly’s representative and/or open one pizza and sandwich sports bar restaurant each year during the ten year term of the agreement.
Concurrent with the appointment of Westshore Georgia as territory representative for the State of Georgia, Philly entered into a franchise agreement with it for one pizza and sandwich sports bar restaurant to be developed and opened at a location in Georgia subject to Philly’s approval within 180 days. Philly received a nonrecurring and non-refundable fee of $30,000 for the agreement. Operation of the franchise is subject to Philly’s normal ongoing franchise fee payments.
Subsequent to August 31, 2011, a shareholder of the Company paid accounting fees to the Company’s auditors of $55,888. The shareholder will receive 200,000 restricted shares of the Company’s common stock with no registration rights in exchange for the payment, a valuation of approximately $.28 per share.
14
Bella Petrella’s Holdings, Inc.
(A majority owned subsidiary of JVW Entertainment, Inc.)
Notes to Financial Statements
(unaudited)
(8) Subsequent Events (continued)
On September 12, 2011, the company issued 250,000 shares of common stock to an individual as incentive to assist the company in finding sources of capital. No contract between the company and the individual currently exists.
15
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
We are an early revenue stage company, engaged in the sale of pasta sauces and salsas. Subsequent to our fiscal quarter end, we purchased a pizza and sandwich sports bar and a company that franchises pizza and sandwich sports bar restaurants.
Since our inception on July 28, 2009 through August 31, 2011 we have generated revenues of $219,447 and incurred a net loss of $1,104,694. We believe that our low corporate expense burden and our acquisition of a pizza and sandwich sports bar restaurant and apizza and sports bar restaurant franchising company will improve revenues and lead to improvements in overall operating results. We also believe that our marketing plan for our pasta sauce products, focusing on institutional sales, will substantially reduce the advertising expenses and promotion expenses required for more traditional retail outlets, such as grocery stores. We believe that we will be able to build volume in institutional sales over the next twelve months due to the reduced acid content of our sauces and salsas, as compared to other brands of tomato based sauces, providing protection from heartburn and acid reflux, as well as our all natural ingredients and homemade flavor. You have no assurance that the actual expenses we incur will not materially exceed our estimates or that cash flows from our business will be adequate to maintain our operations.
The operating activity in the periods ended August 31, 2011 and August 31, 2010 was limited to organizational expenses and revenues and expenses related sales primarily to Ferraro Foods and Lisanti Foods, institutional food distributors to Famous Famiglias Pizzerias.
Even though we realized a modest gross profit in the periods ended August 31, 2011 and 2010, we had operating losses of $167,804 and $164,199 respectively. As a result of consulting fees and other expenses paid by JVW Entertainment, Inc., we experienced non-cash expenses in the period ended August 31, 2010 of $93,093. We have also experienced non-cash expenses in the period ended August 31, 2011 of $140,591, consisting primarily of “Share-Based Compensation” to the CEO and to consultants. We have experienced several periods of capital formation and operating losses which management believes are normal for a new business. Our management believes we can achieve economies of scale by applying fixed operating costs to more than one product and through lower increments in production costs for additional product sales both retail and wholesale.
Revenues
Revenues totaled $34,083 for the three months ended August 31, 2011 as compared to $27,795 for the three months endedAugust 31, 2010. Our sales were primarily to Ferraro Foods and Lisanti, institutional food distributors to Famous Famiglias Pizzerias. Sales to Ferraro Foodsand Lisanti comprised ninety-nine percent of our revenues for the August 31, 2011 period and ninety-eight percent for the August 31, 2010 period. These revenues were from sales of our Alfredo sauce and Spicy Salsas.
16
We expect our sales to increase by approximately $3,000,000 or 2,393% for fiscal year ending May 31, 2012 as we expand our marketing efforts for institutional sales of our sauces and salsas, subject to funding, and as a result of our purchase on September 2, 1011of our pizza and sports bar restaurant, which had unaudited gross revenues of approximately $1,519,000 in their 2010 year; and of our restaurant franchising business, which had audited revenues of approximately $731,000 in its 2010 fiscal year. Planned expansion of the franchise operations is expected to grow by twenty-two stores over the next ten-years. On September 25, 2011 a territory agreement was entered into which requires the territory owner to open ten stores in Georgia over the next ten-years. We plan to realign operations of our franchise stores in Florida to optimize revenues. We are engaged in negotiations for potential territory franchise agreements in Texas, California and Nevada.
Expenses
Operating expenses totaled $175,209 for the three months ended August 31, 2011 compared to $169,241 for the three months endedAugust 31, 2010. The increase in expenses was primarily due to accrued executive salaries.
Liquidity and Capital Resources
As of August 31, 2011, our cash balance was $388. The Statements of Cash Flows provide information about our net cash flow for the financial statement periods presented in this quarterly report. To date, we have financed our operations through the issuance of stock and contributions to capital by JVW Entertainment, Inc.
We expect our liquidity to improve during the 2012 fiscal year based on our recent acquisitions and funding for continuing operations we believe may be available based on our projected revenue growth.
Our financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. Our liquidity to date has been limited to proceeds from the sale of our products and contributions to our capital by JVW Entertainment, Inc. We have no assurance as to how much or for how long JVW Entertainment, Inc. will have the financial ability to continue funding our working capital needs. We do not have a binding agreement that requires our JVW Entertainment, Inc. to make further contributions of capital or provide any other form of funding. We believe cash flow generated from the sale of our products will be sufficient to sustain current operations; but, product sales alone will not generate sufficient profits to implement our plan of operations. To fully implement our plan of operations, we expect to require $10,000,000 over the next thirty-six months. In the event we require additional capital to fund operations and growth, we may need to sell securities in private placements or obtain debt funding. There is no assurance we will be able to make private sales of our securities or obtain debt funding, if we should have a need so to do.
17
The following table provides information about the recent acquisitions of our subsidiaries. More information about the transactions is available in our report on Form 8-K filed on September 6, 2011.
Name of Subsidiary
Note Amount
Due Date
First Extension(1)
Second Extension(2)
Bobby V’s Original Westshore Pizza
$1,106,302
10/31/2011
12/31/2011
08/31/2012
Philly Westshore Franchising Enterprises
$2,581,372
10/31/2011
12/31/2011
08/3/2012
(1) Extension granted, in consideration of 500,000 shares of common stock to be issued.
(2) Extension may be granted in the sole discretion of holder, in consideration of 1,000,000 shares of common stock.
We are currently in talks with several equity participants to secure the $4.5 million we need to pay the notes we have issued to purchase our subsidiaries and to close the purchase the real estate on which our Tampa restaurant is located. You have no assurance we will be successful in its efforts to obtain the needed equity financing. Our noteholders have the right to extend the due dates on the notes and have granted the first of two extensions. If we are unable to pay the notes by the extended due dates and the note holders do not grant the second extension, we would lose ownership of our subsidiaries.
Critical Accounting Policies and Estimates
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, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported revenues and expenses during the period. Management routinely makes judgments and estimates about the effects of matters that are inherently uncertain. Estimates that are critical to the accompanying financial statements include estimates related to classification of expenditures as either an asset or expense, and the likelihood of loss contingencies. Management bases its estimates and judgments on experience, which is limited at this time, and on various other factors that it believes 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. Management revises estimates and assumptions periodically and the effects of revisions are reflected in the financial statements in the period during which it is determined to be necessary. Actual results may differ materially from these estimates under different assumptions or conditions.
18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
307 – Disclosure controls and procedures: As of August 31, 2011, May 31, 2011, our management carried out an evaluation of the effectiveness of disclosure controls and procedures, with the participation of our principal executive and principal financial officers. Disclosure controls and procedures are defined in Exchange Act Rule 15d–15(e) as “controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms and include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.” Based on our evaluation, our chief executive officer and chief financial officer have concluded that, as of May 31, 2011 and August31, 2011, we did not have effective disclosure controls and procedures.
The primary reason for our management’s conclusions is that we did not have a plan in place for implementing controls and procedures nor did we have sufficient personnel to implement checks and balances. We believe that we will have sufficient funds available to develop a plan in the foreseeable future. We do anticipate that our business will need sufficient personnel in the foreseeable future that are needed to implement checks and balances.
308(b) – Changes in internal control over financial reporting: Based upon an evaluation by our management of our internal control over financial reporting, with the participation of our principal executive and principal financial officers, there were no changes made in our internal control over financial reporting during the period ended August 31, 2011 and May31, 2011 that have materially affected or are reasonably likely to materially affect this control.
Limitations on the Effectiveness of Internal Control: Our management does not expect that our disclosure controls and procedures, if any, or our internal controls over financial reporting, if any, will necessarily prevent all fraud and material errors. An internal control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations on all internal control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, and/or by management override of the control. The design of any system of internal control is also based in part upon certain assumptions about risks and the likelihood of future events, and there is no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in circumstances and the degree of compliance with the policies and procedures may deteriorate. Because of the inherent limitations in a cost-effective internal control system, financial reporting misstatements due to error or fraud may occur and not be detected on a timely basis.
19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not engaged in any litigation at the date of this report and do not expect to be engaged in litigation of a routine nature in the future.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
We sold 1,000 shares of common stock for $1.00 per share during the three month period ended August 31, 2011. These shares were sold directly to the purchaser. We did not utilize the services of a broker, or did we pay any commission or other compensation in connection with the sale. We have relied on Section 4(2) of the Securities Act for an exemption from registration.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. REMOVED AND RESERVED BY THE COMMISSION
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS
The following exhibits are attached to this report:
Exhibit
Number
Description
31.1
Rule 15d-14 (a) Certification by Principal Executive and Principal Operating Officer
31.2
Rule 15d-14 (a) Certification by Principal Financial and Principal Accounting Officer
32
Section 1350 Certification of Principal Executive and Principal Operating Officer and Principal Financial Principal Accounting Officer
20
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Bella Petrella’s Holdings, Inc.
Date: October 25, 2011
By:
/s/ John V. Whitman, Jr.
John V. Whitman, Jr., Chief Executive Officer
(Principal Executive and Principal Operating Officer)
/s/ Robert S. Dollar
Robert S. Dollar, Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
21
EXHIBIT 31.1
CERTIFICATION
I, John V. Whitman, Jr., certify that:
1.
I have reviewed this Form 10-Q/A for the fiscal quarter ended August 31, 2011, of Bella Petrella’s Holdings, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4.
The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal year (the small business issuer's fourth fiscal year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5.
The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
Date: October 25, 2011
By:
/s/ John V. Whitman, Jr.
John V. Whitman, Jr., Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
CERTIFICATION
I, Robert S. Dollar, certify that:
1.
I have reviewed this Form 10-Q/A for the fiscal quarter ended August 31, 2011 of Bella Petrella’s Holdings, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;
4.
The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal year (the small business issuer's fourth fiscal year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and
5.
The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting.
Date: October 25, 2011
/s/ Robert S. Dollar
Robert S. Dollar, Chief Financial Officer
(Principal Financial Officer)
EXHIBIT 32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the report of Bella Petrella’s Holdings, Inc. (the "Company") on Form 10-Q/A for the fiscal quarter ended August 31, 2011, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned principal executive officer and the principal financial officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: October 25, 2011
By:
/s/ John V. Whitman, Jr.
John V. Whitman, Jr., Chief Executive Officer
(Principal Executive and Principal Operating Officer)
/s/ Robert S. Dollar
Robert S. Dollar, Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
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