<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED
JANUARY 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 333-4490
ALL AMERICAN FOOD GROUP, INC.
-----------------------------
(Name of Small Business Issuer in Its Charter)
New Jersey 22-3259558
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 Law Drive, Fairfield, New Jersey 07006
---------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(201) 244-9336
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the 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. (X) Yes ( ) No
As of March 14, 1997, there were 3,132,661 shares of the Registrant's Common
Stock outstanding.
<PAGE>
ALL AMERICAN FOOD GROUP, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet at January 31, 1997 and
Consolidated Balance Sheet at October 31, 1996 3
Consolidated Statement of Operations for the three
months ended January 31, 1997 and 1996 4
Consolidated Statement of Cash Flows for the three
months ended January 31, 1997 and 1996 5
Consolidated Statement of Stockholder's Equity for the three
months ended January 31, 1997 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION 13
SIGNATURES 14
<PAGE>
ALL AMERICAN FOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(Unaudited)
January 31, October 31,
----------- -----------
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash 2,007,695 84,302
Accounts receivable, net of allowances for possible losses of $12,000
and $12,000 respectively 198,653 127,490
Notes receivable, current portion 116,872 97,115
Inventories 100,369 66,580
Prepaid expenses 213,237 407,516
----------- -----------
Total Current Assets 2,636,826 783,003
Property, Plant and Equipment, at cost less accumulated depreciation
and amortization of $280,777 and $249,533 respectively 930,162 920,570
Intangible Assets, net of accumulated amortization of $456,234 and $418,460 respectively 255,545 293,319
Security Deposits 84,758 31,148
Notes receivable - long-term 144,079 160,434
----------- -----------
Total Assets 4,051,370 2,188,474
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable $ -- $ 194,899
Accounts payable and accrued expenses 1,194,668 1,345,372
Capitalized lease obligations - current maturities 51,724 75,517
Loans from stockholders - current maturities 12,507 14,727
Current maturities of long-term debt -- 1,932
Deferred franchising revenue, current portion 141,872 189,615
----------- -----------
Total Current Liabilities 1,400,771 1,822,062
Capitalized Lease Obligations 14,906 25,300
Loans from stockholders 4,459 5,454
Deferred franchising revenue 144,079 160,434
----------- -----------
Total Liabilities 1,564,215 2,013,250
----------- -----------
Commitments and contingencies
Redeemable preferred stock, no par value, Series A, 0 and 115,000 shares issued
and outstanding respectively, Series B, 88,500 and 120,000 shares issued and
outstanding respectively, Redemption value of $442,500 at January 31, 1997 391,087 562,678
----------- -----------
Stockholders' Equity (Deficit):
Non-redeemable convertible preferred stock, no par value, Series A, 190,000 shares
authorized, 75,000 shares issued and outstanding, Series B, 180,000 shares authorized
60,000 shares issued and outstanding, Series C, 1,600,000 shares authorized, 982,503
shares issued and outstanding 524,996 537,905
Common stock, no par value, 10,000,000 shares authorized,
3,132,661and 1,867,661 shares issued and outstanding respectively 6,532,973 3,360,136
Accumulated deficit (4,961,901) (4,285,495)
----------- -----------
2,096,068 (387,454)
----------- -----------
Total Liabilities and Stockholders' (Deficit) $ 4,051,370 $ 2,188,474
=========== ===========
</TABLE>
The Accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
-3-
<PAGE>
ALL AMERICAN FOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
January 31,
------------------------
1997 1996
---------- -----------
Revenues:
Store sales $338,390 $305,992
Franchising revenue 328,820 29,949
Equipment and product sales 171,393 157,483
--------- --------
838,603 493,424
--------- --------
Operating expenses:
Cost of Sales - equipment and product costs and
store operations, exclusive of depreciation
and amortization 423,717 327,685
Cost of Sales - franchising activities, exclusive
of depreciation and amortization 190,473 --
Selling, general and administrative expenses 774,449 422,277
Depreciation and amortization 69,019 59,195
Settlement Costs - Employment Contracts 47,010 56,784
--------- --------
1,504,668 865,941
--------- --------
Operating loss (666,065) (372,517)
Interest expense 10,341 13,188
--------- --------
Net loss ($676,406) ($385,705)
========= ========
Adjusted net loss for net loss per common
share calculation:
Net loss ($676,406) ($385,705)
Increase in carrying amount of redeemable preferred
stock (12,909) --
--------- --------
Net loss attributable to common stock ($689,315) ($385,705)
========= ========
Shares outstanding:
Weighted average number of common shares
outstanding 2,518,694 943,150
Additional shares -- 430,558
--------- --------
Adjusted shares outstanding 2,518,694 1,373,708
========= ========
Net loss per common share ($0.27) ($0.28)
========= ========
The Accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
-4-
<PAGE>
ALL AMERICAN FOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
---------------------------
1997 1996
----------- ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss ($ 676,406) ($ 385,705)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Depreciation and amortization 69,019 59,195
Decrease (increase) in:
Accounts receivable (71,163) 74,492
Inventories (33,789) 16,156
Prepaid expenses 194,279 (14,408)
Security deposits (53,610) --
Increase (decrease) in:
Accounts payable and accrued expenses (150,704) (48,455)
Deferred franchising revenue (67,500) (22,500)
----------- -----------
Total adjustments (113,468) 64,480
----------- -----------
Net cash (used in) operating activities (789,874) (321,225)
----------- -----------
Cash Flows from Investing Activities:
Capital expenditures (40,837) --
----------- -----------
Net cash (used in) investing activities (40,837) 0
----------- -----------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 3,172,837 250,000
Proceeds from issuance of preferred stock 100,000
Redemption of preferred stock (184,500) --
Payments of notes payable (194,899) --
Payments of capitalized lease obligations (34,187) (17,641)
Payments of loans from stockholders (3,215) (13,254)
Payments of current maturities of long-term debt (1,932) (1,276)
----------- -----------
Net cash provided by financing activities 2,754,104 317,829
----------- -----------
Net increase (decrease) in cash 1,923,393 (3,396)
Cash - beginning of period 84,302 53,703
----------- -----------
Cash - end of period $ 2,007,695 $ 50,307
=========== ===========
</TABLE>
The Accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
-5-
<PAGE>
ALL AMERICAN FOOD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JANUARY 31, 1997
(Unuadited)
<TABLE>
<CAPTION>
Common Stock Preferred Stock
--------------------- ------------------- Retained
Shares Amount Shares Amount (Deficit) Total
--------- ---------- --------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1996: 1,867,661 $3,360,136 1,117,503 $537,905 ($4,285,495) ($ 387,454)
Common stock issuance - Initial public
offering 1,265,000 3,172,837 -- -- -- 3,172,837
Increase in carrying amount of redeemable
preferred stock -- -- (12,909) -- (12,909)
Net Loss -- -- -- -- (676,406) (676,406)
--------- ---------- --------- -------- ----------- -----------
Balance at January 31, 1997 3,132,661 $6,532,973 1,117,503 $524,996 ($4,961,901) $ 2,096,068
========= ========== ========= ======== =========== ===========
</TABLE>
The Accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
-6-
<PAGE>
ALL AMERICAN FOOD GROUP, INC. & AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) GENERAL
The Company was formed in September 1993 under the name Jutland Food
Group, Inc., for the purpose of establishing a chain of franchised bagel stores.
In October 1993, the Company acquired substantially all of the assets of Howberg
Bakery Equipment Co., Inc., Bagels of New Milford, Inc. and Goldberg's Famous
Bagels of Orangeburg, Inc. The assets acquired consisted of a bagel equipment
business and two retail bagel stores. On September 29, 1994, the Company
acquired all of the outstanding stock of four interrelated corporations all
conducting business under the tradename "Sammy's New York Bagels," The
acquisition consisted of three certified kosher retail bagel stores and a bagel
production facility, all operating under rabbinical supervision. Effective
October 31, 1995 the company changed its fiscal year to October 31st. The
Company changed its name to All American Food Group, Inc. on October 24, 1995.
The Company is principally engaged in the development of a retail chain of
franchised bagel stores, including the operation of a certain number of
Company-owned stores for training, marketing and promotional activities, and the
distribution of bagel bakery equipment and related products to the franchise
system. The Company markets both single unit and market development franchise
agreements. The Company, in the normal course of business, also markets stores
it acquires to individuals who operate as franchisees. The Company franchises
its concepts under the names "Goldberg's New York Bagels" and "Sammy's New York
Bagels."
On December 17, 1996 the Company completed an initial public offering of
1,100,000 shares of its Common Stock at a price to the public of $3.50 per
share, yielding net proceeds to the Company of $2,690,000. On January 9, 1997
the underwriters of the initial public offering exercised their over-allotment
option by purchasing an additional 165,000 shares at a price of $3.50 per share
yielding net proceeds to the Company of $483,000.
(2) BASIS OF PRESENTATION
The consolidated financial statements have been prepared by All American
Food Group, Inc. (the "Company") and are unaudited. The financial statements
have been prepared in accordance with the instructions for Form 10-QSB and,
therefore do not necessarily include all information and footnotes required by
generally accepted accounting principles. In the opinion of the Company, all
adjustments (all of which were of a normal recurring nature) necessary to
present fairly the Company's financial position, results of operations and cash
flows as of January 31, 1997 and for all periods presented have been made. A
description of the Company's accounting policies and other financial information
is included in its October 31, 1996 audited financial statements filed on Form
10-KSB. The consolidated results of operations for the quarter ended January 31,
1997 are not necessarily indicative of the results expected for the full year.
-7-
<PAGE>
ALL AMERICAN FOOD GROUP, INC. & AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(3) NET LOSS PER COMMON SHARE
Net loss per common share was determined by dividing net loss, as
adjusted, by the weighted average number of common shares outstanding, as
adjusted. The net loss for the three months ended January 31, 1997 was adjusted
by an increase of $12,909 representing the increase in the carrying amount of
redeemable preferred stock. The weighted average number of common shares
outstanding was adjusted by an increase of 430,558 shares for the three months
ended January 31, 1996. These additional shares represent the number of shares
and options issued within the twelve months prior to May 3, 1996, when the
Company filed a registration statement for an initial public offering (IPO),
that were issued for consideration per share or at an exercise price per share
less than the anticipated IPO price of $3.50 per share. The treasury stock
method was used to determine the net increase in the number of shares
outstanding. No adjustment for these additional shares has been made in
calculating the weighted average number of common shares outstanding for the
three month period ended January 31, 1997.
(4) POTENTIAL ACQUISITION
In January 1997, the Company entered into a letter of intent to acquire up
to eight stores in Connecticut, one of which will be Company-owned and the
balance of which are expected to be franchised units. The stores to be acquired
currently operated under the trade name "Bagel Connection". The Company
anticipates completing this acquisition in March 1997.
(5) SUBSEQUENT EVENT
On March 6, 1997, the Company sold an option to purchase up to 1,000,000
shares of the Company's Common Stock for $50,000 to a foreign investor. The
option entitles the holder to purchase shares at a price of $.95 per share and
expires on September 5, 1997. Both the option and the underlying shares are
being issued in reliance on the exemption from registration pursuant to
Regulation S. If and when any portion of the option is exercised, the Company
will report such event on Form 8-K, or Form 10-QSB.
-8-
<PAGE>
ALL AMERICAN FOOD GROUP, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS REPORT ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY, INCLUDING,
WITHOUT LIMITATION, RISKS ASSOCIATED WITH THE COMPANY'S ABILITY TO DEVELOP,
CONSTRUCT, ACQUIRE OR FRANCHISE ADDITIONAL STORES IN ACCORDANCE WITH THE
COMPANY'S BUSINESS PLAN, MANAGEMENT OF QUARTER TO QUARTER RESULTS, INCREASES IN
OPERATING COSTS AND SUCCESSFUL INTEGRATION OF POSSIBLE ACQUISITIONS. THESE RISKS
ARE SET FORTH IN THE "RISK FACTORS" SECTION OF THE PROSPECTUS PORTION OF THE
COMPANY'S FORM SB-2 REGISTRATION STATEMENT AND THE "RISK FACTORS" SECTION
CONTAINED HEREIN. UPDATED INFORMATION WILL BE PERIODICALLY PROVIDED BY THE
COMPANY AS REQUIRED BY THE SECURITIES ACT OF 1933 AND THE SECURITIES EXCHANGE
ACT OF 1934. THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH THE COMPANY'S FINANCIAL STATEMENTS AND NOTES HERETO. THE DISCUSSION OF
RESULTS, CAUSES AND TRENDS SHOULD NOT BE CONSTRUED TO IMPLY ANY CONCLUSION THAT
SUCH RESULTS OR TRENDS WILL NECESSARILY CONTINUE IN THE FUTURE.
OVERVIEW
Results of Operations - Three Months Ended January 31, 1997 and 1996
Revenues for the three months ended January 31, 1997 (the "1997 Quarter")
were $838,603, an increase of $345,179, or 70%, from $493,424 for the three
months ended January 31, 1996 (the "1996 Quarter"). This increase is
attributable to (i) an increase in store sales of $32,398, or 11%, to $338,390
in the 1997 Quarter from $305,992 in the 1996 Quarter, as a result of an
increase to four stores from three stores operated by the Company during the
first three months, (ii) an increase in franchising activities of $298,871, or
998%, to $328,820 in the 1997 Quarter from $29,949 in the 1996 Quarter
consisting of (a) an increase in initial non-recurring revenue from the sale of
Company-owned stores to franchisees of $200,000 in the 1997 Quarter from $0 in
the 1996 Quarter, (b) an increase in initial non-recurring franchise and market
development fees of $76,240, or 339%, to $98,740 in the 1997 Quarter from
$22,500 in the 1996 Quarter and (c) an increase in ongoing royalties of $22,631,
or 304%, to $30,080 in the 1997 Quarter from $7,449 in the 1996 Quarter, and
(iii) an increase in commissary and product sales of $33,634, or 52%, to $98,791
in the 1997 Quarter from $65,157 in the 1996 Quarter, as a consequence of a
greater number of franchise stores and a concomitant increase in demand for
product during the 1997 Quarter, which increases were partially offset by a
decrease in equipment sales of $19,724, or 21%, to $72,602 in the 1997 Quarter
from $92,326 in the 1996 Quarter, primarily due to the fact that, during the
1997 Quarter the Company has focused on franchising activities rather than on
sales of equipment to unaffiliated purchasers.
Management anticipates that future equipment and commissary sales will be
dependent on the Company's franchising activities rather than on sales to
unaffiliated purchasers and that such sales will increase or decrease in direct
proportion to the Company's success in expanding its system of franchise stores.
-9-
<PAGE>
ALL AMERICAN FOOD GROUP, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-(Continued)
Cost of sales increased by $286,505, or 87%, to $614,190 in the 1997
Quarter from $327,685 in the 1996 Quarter. This increase is primarily due to the
sale of a Company-owned store to a franchisee and increased store sales. Cost of
sales as a percentage of product sales increased to 83% in the 1997 Quarter from
72% in the 1996 Quarter, reflecting the net effect of an increase in the sale of
a Company-owned store to a franchisee, and an increase attributable to the
upgrading of the Company's Lodi, New Jersey commissary and production facility
and increases in payroll and fixed overhead costs associated with expansion of
this facility. To the extent that future increases in the Company's total
revenues are attributable to franchise fees, market development fees and
franchise royalties, costs of sales can be expected to decrease as a percentage
of revenues.
Selling, general and administrative expenses increased by $352,172, or
83%, to $774,449 in the 1997 Quarter from $422,277 in the 1996 Quarter. This
increase in both absolute dollars and as a percentage of revenues is
attributable to the implementation of the Company's national expansion plan. The
increase is primarily due to (i) an increase in salaries and related costs of
$99,217, or 64%, to $254,956 in the 1997 Quarter from $155,739 in the 1996
Quarter, (ii) an increase in selling expense of $63,757, or 89%, to $135,028 in
the 1997 Quarter from $71,271 in the 1996 Quarter, primarily due to increased
travel expenses related to franchise sales efforts, visits to proposed retail
locations and provision of on-site store training and assistance, and increased
shipping costs associated with increased product sales and (iii) an increase in
occupancy costs of $47,448, or 85%, to $103,078 in the 1997 Quarter from $55,630
in the 1996 Quarter attributable to an increase to four stores operated by the
Company from three stores during the first three months and an additional
Company owned store which opened on the last day of the 1997 Quarter.
Depreciation and amortization increased by $9,824, or 17%, to $69,019 in
the 1997 Quarter from $59,195 in the 1996 Quarter, primarily as a consequence of
the fact that the Company owned and operated one more store in the 1997 Quarter.
Interest expense decreased by $2,847, or 22%, to $10,341 in the 1997
Quarter from $13,188 in the 1996 Quarter, as a consequence of a continued
reduction in the ordinary course of business of the Company's outstanding debt.
The net loss increased by $290,701, or 75%, to $676,406 in the 1997
Quarter from $385,705 in the 1996 Quarter. To date, the Company has operated at
a loss as a result of the application of resources in excess of revenues to
develop its operating infrastructure in anticipation of additional franchise
sales, Company-store growth and commissary growth. Consequently, total revenues
are not yet sufficient to support the Company's overhead. Management
anticipates, that during the fiscal year ending October 31, 1997, the Company's
revenues will increase due to additional franchise sales, increased royalty
income from existing stores, increased equipment sales to new franchisees,
increased sales in existing Company-owned stores, and sales revenues from newly
opened, Company-owned stores. There can be no assurance, however as to whether,
and to what extent, the Company will actually experience additional revenues
from any of these sources. The Company's ability to operate profitably in the
future is substantially dependent upon its ability to sell store and market
development franchises and to open additional franchise stores.
-10-
<PAGE>
ALL AMERICAN FOOD GROUP, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-(Continued)
Liquidity and Capital Resources
In April 1996, the Company completed the Private Placements of its Common
Stock pursuant to which it received proceeds of $2,413,986. Of the net proceeds,
$410,000 consisted of property in the form of two unopened retail bagel stores
in the final stages of construction.
In December 1996 and January 1997, the Company completed an initial public
offering of 1,265,000 shares of its Common Stock (including 165,000 shares to
cover the underwriters' over-allotments) at a price to the public of $3.50 per
share, yielding net proceeds to the Company of $3,173,000. The proceeds of the
offering are being used to redeem Series A and Series B Preferred Stock, open
additional Company-owned flagship stores, expand the Company's equipment
inventory, relocate and consolidate its headquarters and commissary facilities,
expand its marketing and promotional activities, reduce accounts payable and
accrued expenses, develop its franchising system and for working capital and
general corporate purposes.
The Company's revenues are not yet sufficient to support the Company's
operating expenses. Cash used by operating activities for the three months ended
January 31, 1997 was $789,874 compared to cash used by operating activities of
$321,225 during the three months ended January 31, 1996.
The Company had working capital of $1,236,055 at January 31, 1997.
Management anticipates that this working capital and funds generated from
operations will be sufficient to meet its capital requirements through the end
of 1997.
-11-
<PAGE>
ALL AMERICAN FOOD GROUP, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS-(Continued)
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS REPORT, PROSPECTIVE
INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS IN EVALUATING THE COMPANY AND
ITS BUSINESS.
EXPANSION. As of January 31, 1997 there were 15 stores in operation,
consisting of 5 Company-owned and 10 franchised stores. By the end of 1997, the
Company contemplates having approximately 5 to 7 Company-owned and 45 to 50
franchised stores in operation. The Company expects to have 5 to 7 Company-owned
and 95 to 100 franchised stores in operation by the end of 1998. The Company
intends to use a significant portion of the net proceeds of its initial public
offering to develop additional Company-owned stores and to support its marketing
efforts to attract new franchisees. There can be no assurance that the Company
will be able to attract new franchisees to open all of the planned new stores,
or that, if opened, such stores can operate profitably. The opening and success
of the Company's owned and operated and franchised stores will depend on various
factors, not all of which are in the control of the Company, including customer
acceptance of the Company's concept in new markets, the availability of suitable
sites, the negotiation of acceptable lease or purchase terms for new locations,
permit and regulatory compliance, the ability to meet construction schedules,
the financial and other capabilities of the Company and its franchisees, the
ability of the Company to successfully manage this anticipated expansion and to
hire and train personnel, and general economic and business conditions.
Furthermore, because of the Company's relatively small store base, an
unsuccessful store could have a more significant adverse effect on the Company's
results of operations than would be the case for a company with a larger store
base.
The Company's expansion will also require the implementation and
integration of enhanced operational and financial systems and additional
management, operational and financial resources. Failure to implement and
integrate these systems and add these resources could have a material adverse
effect on the Company's results of operations and financial condition. There can
be no assurance that the Company will be able to manage its expanding operations
effectively or that it will be able to maintain or accelerate its growth or to
maintain its present level of revenues and net loss. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
POSSIBLE ACQUISITIONS. The Company's growth strategy includes possible
acquisitions of bagel stores. However, no assurance can be given that the
Company will be able to find attractive acquisition candidates, consummate
additional acquisitions or that it will successfully integrate, convert or
operate any acquired business. In the event that the Company makes acquisitions,
there can be no assurance that any such acquisition and resulting conversion
expenses, including loss of store sales during the remodel period, if any, will
not have a material adverse effect upon the Company's operating results,
particularly during the period in which such operations are being integrated
into the Company. Furthermore, the Company's ability to make acquisitions may
depend upon its ability to obtain financing. There can be no assurance that the
Company will be able to obtain financing on acceptable terms.
-12-
<PAGE>
ALL AMERICAN FOOD GROUP, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Subsequent Events - Sale of Equity Securities Pursuant to
Regulation S
On March 6, 1997, the Company sold an option to purchase up to
1,000,000 shares of the Company's Common Stock at $.95 per share for
$50,000. The option expires on September 5, 1997 and both the option
and the underlying shares are being issued in reliance on the
exemption from registration pursuant to Regulation S. The option was
sold to Tarlton Company LTD. a Cayman Islands Corporation.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Item 27 -- Financial Data Schedule
(b) Reports on Form 8-K
None
-13-
<PAGE>
ALL AMERICAN FOOD GROUP, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, this 14th day of March, 1997.
ALL AMERICAN FOOD GROUP, INC.
By: /s/ Andrew Thorburn
----------------------------------------
Chairman of the Board of Directors,
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Chris R. Decker
----------------------------------------
Director, Executive Vice President
and Chief Financial Officer
(Principal Financial and Accounting
Officer)
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1997
<PERIOD-END> JAN-31-1997
<CASH> 2,007,695
<SECURITIES> 0
<RECEIVABLES> 471,604
<ALLOWANCES> 12,000
<INVENTORY> 100,369
<CURRENT-ASSETS> 2,636,826
<PP&E> 1,210,939
<DEPRECIATION> 280,777
<TOTAL-ASSETS> 4,051,370
<CURRENT-LIABILITIES> 1,400,771
<BONDS> 0
6,532,973
391,087
<COMMON> 524,996
<OTHER-SE> (4,961,901)
<TOTAL-LIABILITY-AND-EQUITY> 4,051,370
<SALES> 509,783
<TOTAL-REVENUES> 838,603
<CGS> 423,717
<TOTAL-COSTS> 1,504,668
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,341
<INCOME-PRETAX> (676,406)
<INCOME-TAX> 0
<INCOME-CONTINUING> (676,406)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (676,406)
<EPS-PRIMARY> (.27)
<EPS-DILUTED> (.22)
</TABLE>
