Doughnut maker Krispy Kreme said it expects to report a net loss for the second quarter as results continue to be adversely affected by legal and regulatory costs.

The company's announcement said it expects revenues for the quarter to drop from US$140m last year to $110m this year. Systemwide, sales tumbled about 15%, the company said

Despite the lacklustre figures, CEO Daryl Brewster said Krispy Kreme was making progress. "In the United States, we saw signs of stability in company stores as evidenced by average weekly sales trends," he said. "We also advanced our international expansion plans with the signing of franchisees in six new markets."

The company also said it would once again miss a deadline to file a report with the US Securities and Exchange Commission as it struggles with a restatement of past results.

The doughnut maker said in an SEC filing that it is unable to finalise its financial report for the fiscal second quarter that ended 30 July 2006, until it has completed its reports for fiscal 2006, the third quarter of fiscal 2005, and the first quarter of fiscal 2007.