Paciugo drove investor crazy after money is cashed in

On December 19, 2002, Novo executed a purchase agreement with Ad Astra Holdings LP, a Texas limited partnership, Paciugo Management LLC, a Texas limited liability company and the sole general partner of Ad Astra, and the collective equity owners of both Ad Astra and PMLLC, being Ugo Ginatta, Cristiana Ginatta and Vincent Ginatta. Pursuant to the Purchase Agreement, Novo acquired a 33% membership interest in PMLLC and a 32.67% limited partnership interest in Ad Astra, which results in the Company holding an aggregate interest, including the PMLLC general partnership interest, in Ad Astra equal to 33%, for a purchase price of $2.5 million.

In addition, Novo holds an option, exercisable for a period of two years from December 19, 2002, to purchase a 17.3% membership interest in PMLLC and a 17.127% interest in Ad Astra for $1.5 million. Together, the Initial Interest and the Subsequent Interest would result in Novo holding a 50.3% membership interest in PMLLC and a 49.797% limited partnership interest in Ad Astra, for a total aggregate interest in Ad Astra, including the PMLLC general partner interest, of 50.3%.

Collectively, Ad Astra and PMLLC, through a number of wholly owned subsidiaries, own and manage a gelato manufacturing, retailing and catering business operating under the brand name "Paciugo." Throughout this article, reference is made collectively to Ad Astra, PMLLC, and their subsidiaries as "Paciugo." Under the terms of the Purchase Agreement, Novo provides services to support the business operations of Paciugo, including administrative, accounting, financial, human resources, information technology, legal, and marketing services. The Support Services expressly exclude providing certain capital expenditures as well as services that are customarily performed by third party professionals. In exchange for providing the Support Services, Novo is entitled to receive an annual amount equal to the greater of $0.25 million or 2% of the consolidated gross revenues of Paciugo (excluding any gross revenues shared with third parties under existing contractual arrangements). Effective January 1, 2003, Novo began receiving monthly payments from Paciugo in the amount of $20,833, with positive cumulative differences, if any, between 2% of such gross revenues and $20,833 per month to be paid within ten days of the end of such month. In July and August, 2003, Novo recorded other income from the provision of the Support Services to Paciugo as agreed upon in the Purchase Agreement. In August of 2003, certain disagreements arose between Novo and Paciugo concerning the amount of the monthly payment for July of 2003, as well as Novo's performance of the Support Services. As a result, Paciugo has failed to make these payments since August of 2003. The loss of these monthly payments by Paciugo could adversely affect Novo Networks' financial condition. While the Company is attempting to work through its disagreements with Paciugo, it can offer no assurances that these issues will be resolved without any material adverse effect on Novo's plan of operation. Paciugo may not cancel or alter the scope of the Support Services without Novo's prior approval or consent.

The Company is entitled, under the terms of the Purchase Agreement, to such representation on the governing board of PMLLC as is proportionate to its ownership interests therein. Effective as of December 19, 2002, PMLLC's Board of Managers was composed of Ugo Ginatta and Cristiana Ginatta, as the Equity Owners' designees, and Barrett N. Wissman, as Novo's designee. PMLLC, as the sole general partner of Ad Astra, is empowered to make all decisions associated with Ad Astra, except for those requiring the approval of the limited partners, as set forth in the limited partnership agreement of Ad Astra or under applicable law.

Novo effectively maintains no ability to control the day-to-day affairs of its Paciugo interest. On August 1, 2003, Susie C. Holliday resigned from her position as Senior Vice President and Chief Financial Officer of Paciugo along with her resignation from her position with Novo Networks. On August 15, 2003, Patrick G. Mackey was named Senior Vice President and Chief Financial Officer of Paciugo. On August 25, 2003, Barrett N. Wissman resigned from the position of President of Paciugo. In addition, during the first three calendar quarters of 2003, Novo's Board of Directors became increasingly more concerned about Paciugo's market position, the industry in which Paciugo competes and Paciugo's prospects for meaningful success therein. Accordingly, during the current quarter, Novo concluded that it was reasonably unlikely that it would expand its Paciugo interest and exercise its option to acquire the Subsequent Interest. Therefore, effective on October 1, 2003, Steven W. Caple and Patrick G. Mackey resigned their positions as Senior Vice President and General Counsel and Senior Vice President and Chief Financial Officer of Paciugo, respectively.

Depending upon a variety of factors, including those outlined above, most of which are beyond the Company's control, Novo may determine it necessary to record impairment charges against the Paciugo interest in its 2004 fiscal year. The factors that may result in the impairment of Novo's Paciugo interest include, without limitation:
* Paciugo's ability, outside of Novo's exercise of the option to acquire the Subsequent Interest, to locate additional working capital;
* Paciugo's ability to expand sales while controlling and reducing costs; and
* Paciugo's ability to compete against more well-known gelato, frozen dessert, and ice cream stores, many of which maintain greater management, financial and other resources.

quoted from http://bankrupt.com/TCR_Public/031120.mbx

What is Paciugo? Where is it?

If you just tuned in..... PACIUGO is a gelato chain that was started by an Italian couple who treated hard working employees like dirt. They hired illegal workers to work in their shops and kitchen so they can control those people. Employees were trained to tell customers that their gelato is wholesome, 70% less fat than premium ice cream and made fresh every day. Their milk based gelato is not made with whole milk only. Their sorbet is not made with water, sugar and fruit only. There is food coloring, jams and very little fresh fruit. They gelato is recycled every morning. The story that are told to the customers are scripted lie and deception.

I feel really bad for the people who bought their franchises. Prospective franchisees do not know how they do business. Paciugo owners looks nice and polite to the outsiders. Especially to the people who are willing to pour money on them. What happen to Novo Networks who had 33% stake in Paciugo? The italian drove them crazy after pocketed $2.5 million. Read the story here: http://bankrupt.com/TCR_Public/031120.mbx.

Please think twice before buying a Paciugo franchise. What happen to Paciugo stores that were closed? Do you ever ask why about it? The owner only shows the best performing store to impress prospective franchisees. That sales result shown is a few years ago result. There was only one store in Dallas. Sales never goes up to that level after more stores are opened. Sales was really bad in the fall, winter and spring. Summer was good but it is not enough to cover the loss.