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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
July 6, 1998
INTERFOODS OF AMERICA, INC.
(Exact name of registrant as specified in this charter)
NEVADA 000-21093 59-3356011
(State of other jurisdiction (Commission (IRS Employer
of incorporation File Number) Identification No.)
9400 SOUTH DADELAND BOULEVARD, SUITE 720, MIAMI, FLORIDA 33156
(Address and Zip Code of Principal Executive Offices)
Issuer's Telephone Number: (305) 670-0746
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<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not Applicable
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 6, 1998, the Registrant, pursuant to an Asset Purchase Agreement,
purchased five Popeyes Chicken Franchises from TSW Foods, Inc., including the
real estate upon which two of the franchises are located. Neither TSW Foods,
Inc. or its principals are affiliated with the Registrant. All five francises
are located in the Pensacola, Florida area. Of the $1,800,000 total purchase
price, $1,650,000 was paid in cash, $50,000 of assumed liabilities and the
remainder was paid by the Company through the issuance of 133,333 shares of the
Company's restricted common stock. Thereafter, the Registrant sold the two
parcels of real estate in a sale lease back transaction with Franchise Finance
Corporation of America.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not Applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not Applicable.
ITEM 5. OTHER EVENTS.
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS.
Not Applicable.
ITEM 7. FINANCIAL STATEMENT AND EXHIBITS.
(a) EXHIBITS
Audited financial statements for TWS Foods, Inc. are attached hereto.
ITEM 8. CHANGE IN FISCAL YEAR
Not Applicable.
2
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERFOODS OF AMERICA, INC.
(Registrant)
By: /s/ ROBERT S. BERG
---------------------------------------
Robert Berg, Chief Executive Officer
Dated: February 22, 1999.
3
<PAGE>
<TABLE>
<CAPTION>
INTERFOODS OF AMERICA, INC.
UNAUDITED PRO FORMA BALANCE SHEET
JUNE 30, 1998
Interfoods of TSW Pro Forma
America, Inc. Foods, Inc. Adjustments Pro Forma
------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 40,951 $ - $ - 1 $ 40,951
Accounts receivable - - - -
Inventories 80,788 24,005 (24,005) 1 80,788
Prepaid and other assets 48,374 12,895 (12,895) 1 48,374
Note receivable 500,000 - - 500,000
Deferred tax asset - - - -
--------- --------- --------- ----------
Total current assets 670,113 36,900 (36,900) 670,113
--------- --------- --------- ----------
Property and equipment 4,457,445 889,104 (639,104) 2 4,707,445
--------- --------- --------- ----------
Other assets:
Other assets 367,919 12,955 (12,955) 1 367,919
Investment in unaffiliated company 500,000 - - 500,000
Goodwill, net 2,445,671 - - 2,445,671
Other intangibles, net 255,715 81,443 (81,443) 1 255,715
--------- --------- --------- ----------
Total other assets 3,569,305 94,398 (94,398) 3,569,305
--------- --------- --------- ----------
Total assets $8,696,863 $1,020,402 $(770,402) $8,946,863
========== ========== ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued $2,009,603 $ 170,553 $ (20,553) 2 $2,159,603
liabilities
Current portion of capital lease
obligations - 9,360 (9,360) 1 -
Current portion of long term debt 281,248 95,300 (95,300) 1 281,248
Notes payable to stockholders - 558,040 (558,040) 1 -
Current portion of deferred income
on sale and leaseback transactions 48,349 - - 48,349
--------- --------- --------- ----------
Total current liabilities 2,339,200 833,253 (683,253) 2,489,200
Deferred income on sale and leaseback
transactions, net of current portion 846,002 - - 846,002
Capital lease obligations, net of
current portion - 31,169 (31,169) 1 -
Long term debt, net of current portion 1,178,804 341,646 (341,646) 1 1,178,804
--------- --------- --------- ----------
Total liabilities 4,364,006 1,206,068 (1,056,068) 4,514,006
Mandatorily redeemable class A and
B preferred stock 460,000 - - 460,000
Stockholder's equity:
Common stock 8,119 67,500 (67,357) 1 8,262
Additional paid-in capital 4,224,962 - 99,857 2 4,324,819
Accumulated deficit/retained earnings 368,044 (213,166) 213,166 1 368,044
Treasury stock (728,268) (40,000) 40,000 1 (728,268)
--------- --------- --------- ----------
Total stockholders' equity 3,872,857 (185,666) 285,666 3,972,857
--------- --------- --------- ----------
Total liabilities and stockholders'
equity $8,696,863 $1,020,402 $(770,402) $8,946,863
========== ========== ========= ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERFOODS OF AMERICA, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
Interfoods of R. Jones
America, Enterprises, TSW Foods, Pro Forma
Inc. Inc. Inc. Adjustments Pro Forma
--------------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
Restaurant sales $13,830,499 $5,901,207 $3,138,726 $ - $22,870,432
Royalties and fees 261,683 - - - 261,683
---------- --------- --------- --------- ----------
Total revenues 14,092,182 5,901,207 3,138,726 - 23,132,115
---------- --------- --------- --------- ----------
Cost and expenses:
Cost of sales 12,184,518 5,255,910 2,837,569 100,827 9 20,378,824
General and administrative 1,574,526 517,808 136,889 (350,400) 4 1,878,823
Depreciation and amortization 187,690 97,212 93,551 (131,202) 5 247,251
---------- --------- --------- --------- ----------
Total cost and expenses 13,946,734 5,870,930 3,068,009 (380,775) 22,504,898
---------- --------- --------- --------- ----------
Operating profit (loss) 145,448 30,277 70,717 380,775 627,217
---------- --------- --------- --------- ----------
Other income (expense):
Other income 62,821 5,131 1,407 (2,631) 5 66,728
Interest, net (54,291) (25,425) (69,821) 47,401 1 (102,136)
---------- --------- --------- --------- ----------
Total other income 8,530 (20,294) (68,414) 44,770 (35,408)
---------- --------- --------- --------- ----------
(expense)
Income before benefit
(provision) for income taxes 153,978 9,983 2,303 425,545 591,809
Benefit (provision) for income taxes 164,900 (3,993) - (176,353) 6 (15,446)
---------- --------- --------- --------- ----------
Net income $ 318,878 $ 5,990 $ 2,303 $ 249,192 $ 576,363
========= ========= ========= ========= ==========
Net income per share, basic
and diluted $ 0.05 $ .09
========= ==========
Weighted average shares
outstanding 6,585,958 6,719,291
========= ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INTERFOODS OF AMERICA, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1998
Interfoods of TSW Pro Forma
America, Inc. Foods, Inc. Adjustments Pro Forma
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Restaurant sales $16,201,401 $2,177,243 $1,047,949 8 $19,426,593
Royalties and fees 42,214 - - 42,214
----------- ---------- ---------- -----------
Total revenues 16,243,615 2,177,243 1,047,949 19,468,807
----------- ---------- ---------- -----------
Cost and expenses:
Cost of sales 14,019,981 1,926,834 1,088,237 8 17,035,052
General and administrative 1,851,160 109,857 (20,117) 4 1,940,900
Depreciation and amortization 197,231 59,197 (59,197) 5 197,231
----------- ---------- ---------- -----------
Total cost and expenses 16,068,372 2,095,888 1,008,923 19,173,183
----------- ---------- ---------- -----------
Operating profit (loss) 175,243 81,355 39,026 295,624
----------- ---------- ---------- -----------
Other income (expense):
Other income 650,523 90,658 (586,541) 7 154,640
Interest, net (126,263) (33,854) 16,482 1 (143,635)
----------- ---------- ---------- -----------
Total other income (expense) 524,260 56,804 (570,059) 11,005
----------- ---------- ---------- -----------
Income before taxes 699,503 138,159 (531,033) 306,629
Benefit (provision) for income taxes (242,150) - 166,105 6 (76,045)
----------- ---------- ---------- -----------
Net income $ 457,353 $ 138,19 $ (364,928) $ 230,584
=========== ========== =========== ===========
Net income per share, basic and diluted $ .08 $ .04
=========== ===========
Weighted average shares outstanding 5,681,554 5,814,887
=========== ===========
</TABLE>
<PAGE>
INTERFOODS OF AMERICA, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The unaudited pro forma financial statements give effect to the purchase by
Interfoods of America, Inc. (the "Company") of R. Jones Enterprises, Inc.
("Jones") for $3,700,000 on December 11, 1997 and TSW Foods, Inc. ("TSW") for
$1,800,000 on July 6, 1998. The unaudited pro forma balance sheet as of June 30,
1998 and the unaudited pro forma statements of operations for the year ended
September 30, 1997 and the nine months ended June 30, 1998 reflect adjustments
to the TSW historical balance sheet as of June 30, 1998 and statements of
operations for the year ended September 30, 1997 and the nine month period ended
June 30, 1998 to give effect to the transactions discussed above as if such
transactions had been consummated at June 30, 1998 for balance sheet purposes,
or at the beginning of the periods presented for statement of operations
purposes. These acquisitions have been accounted for under the purchase method
of accounting.
The unaudited pro forma financial statements may not necessarily be indicative
of the results that would actually have been obtained had the transactions
occurred on the dates indicated or which may be obtained in the future. In the
opinion of the Company's management, all adjustments necessary to present fairly
such unaudited pro forma combined financial statements have been included.
1. Amounts represent balance sheet and related statement of operations
items which were not purchased from TSW.
2. Amount represents the net effect of the purchase of the assets for the
five stores acquired from TSW and the related immediate sale-leaseback
transactions with a financial institution on July 6, 1998. The net
effect of the purchase and sale-leaseback left the Company with deferred
acquisition costs of $100,000. The remaining three locations are on
long-term leases for the land and building. The following represents the
detail of the transaction:
Assumed liabilities $ 50,000
Company common stock 100,000
Cash 1,650,000
----------
Purchase price $1,800,000
==========
Fair value of assets acquired:
Land and building $1,650,000
Equipment 150,000
----------
$1,800,000
==========
Sale-leaseback:
Sales price $1,650,000
Land and building fair market value (1,650,000)
----------
$ -
==========
3. Amount represents the reduction in rent cost for Jones as a result of
the sale leaseback transactions.
<PAGE>
4. Amount represents the reduction of general and administrative costs
associated with the Baton Rouge, LA and Pensacola, FL office costs that
would not have existed on a pro forma basis for periods presented.
5. Amount represents the depreciation and amortization adjustment for the
new asset base after the purchase and sale-leaseback transactions.
6. Represents the tax effect of pro forma adjustments.
7. Amount consists primarily of the reversal of nonrecurring charges of
$411,584 and the reversal of a nonrecurring gain of $1,000,000 on the
sale of a subsidiary of the Company, along with $29,504 representing
statement of operations items which were not purchased from Jones. See
the Company's Form 10-QSB as filed for further discussion regarding
nonrecurring items.
8. Amount primarily represents operations of Jones during the period of
October 1997 through December 1997 prior to the Company's acquisition of
Jones and an increase in rent costs resulting from the sale-leaseback
transaction (see Note 2).
9. Amount primarily represents a net increase in rent costs as a result of
the sale-leaseback transaction.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
TSW Foods, Inc.
D/B/A Popeye's Chicken & Biscuits:
We have audited the accompanying balance sheet of TSW Foods, Inc. (a Louisiana
corporation) as of December 28, 1997, and the related statements of operations
and retained earnings and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TSW Foods, Inc. as of December
28, 1997, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
Miami, Florida,
July 31, 1998.
<PAGE>
<TABLE>
<CAPTION>
TSW FOODS, INC.
D/B/A POPEYE'S CHICKEN & BISCUITS
BALANCE SHEETS
ASSETS
June 30, December 28,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ - $ 33,890
Inventories 24,005 27,790
Prepaid expenses 12,895 3,233
----------- -----------
Total current assets 36,900 64,913
----------- -----------
PROPERTY AND EQUIPMENT, net 889,104 1,197,485
----------- -----------
OTHER ASSETS:
Franchise fees, net of accumulated amortization of
$52,764 (unaudited) and $48,750 at June 30, 1998
and December 28, 1997, respectively 81,443 83,750
Other assets 12,955 3,598
----------- -----------
Total other assets 94,398 87,348
----------- -----------
Total assets $ 1,020,402 $ 1,349,746
=========== ===========
</TABLE>
(Continued)
<PAGE>
<TABLE>
<CAPTION>
TSW FOODS, INC.
D/B/A POPEYE'S CHICKEN & BISCUITS
BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 28,
1998 1997
---------- ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 153,038 $ 153,284
Accrued expenses 17,515 19,411
Current portion of capital lease obligations 9,360 9,360
Current portion of notes payable 95,300 188,028
Accrued interest payable to stockholders - 53,307
Notes payable to stockholders 558,040 664,841
----------- -----------
Total current liabilities 833,253 1,088,231
CAPITAL LEASE OBLIGATIONS, net of current portion 31,169 35,849
NOTES PAYABLE, net of current portion 341,646 502,114
----------- -----------
Total liabilities 1,206,068 1,626,194
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' EQUITY:
Common stock, no par value; 20,000 shares authorized; 6,125 shares
issued; 1,500 (unaudited) and 4,375 shares outstanding at June 30,
1998 and December 28, 1997, respectively 67,500 67,500
Deficit (213,166) (328,948)
Treasury stock, at cost; 4,625 (unaudited) and
1,750 shares at June 30, 1998 and December 28,
1997, respectively (40,000) (15,000)
----------- -----------
Total stockholders' equity (185,666) (276,448)
----------- -----------
Total liabilities and stockholders' equity $ 1,020,402 $ 1,349,746
=========== ===========
</TABLE>
The accompanying notes to the financial statements are an integral part of these
balance sheets.
<PAGE>
<TABLE>
<CAPTION>
TSW FOODS, INC.
D/B/A POPEYE'S CHICKEN & BISCUITS
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
Six Months
Ended Year Ended
June 30, December 28,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
NET SALES $ 1,387,268 $ 3,138,726
----------- -----------
OPERATING EXPENSES:
Cost of sales 1,203,147 2,837,569
General and administrative expenses 89,429 136,889
Depreciation and amortization 40,857 93,551
----------- -----------
Total costs and expenses 1,333,433 3,068,009
----------- -----------
Income from operations 53,835 70,717
----------- -----------
OTHER INCOME (EXPENSE):
Interest, net (24,718) (69,821)
Other income 86,665 1,407
----------- -----------
Total other income (expense) 61,947 (68,414)
----------- -----------
Net income 115,782 2,303
DEFICIT, beginning of period (328,948) (331,251)
----------- -----------
DEFICIT, end of period $ (213,166) $ (328,948)
=========== ===========
</TABLE>
The accompanying notes to the financial statements are an integral part of these
statements.
<PAGE>
<TABLE>
<CAPTION>
TSW FOODS, INC.
D/B/A POPEYE'S CHICKEN & BISCUITS
STATEMENTS OF CASH FLOWS
Six Months
Ended Year Ended
June 30, December 28,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 115,782 $ 2,303
Adjustments to reconcile net income to net cash
provided by (used in) operating activities-
Depreciation and amortization 40,857 93,551
(Gain) loss on sale of equipment (86,125) 2,192
Changes in assets and liabilities:
Accounts receivable - 1,178
Inventories 3,785 (4,577)
Prepaid expenses (9,662) 13,530
Other assets (9,357) (230)
Accounts payable (246) 62,081
Accrued expenses (55,203) (5,157)
---------- ----------
Net cash provided by (used in)
operating activities (169) 164,871
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of franchise rights - (7,500)
Capital expenditures - (51,725)
Proceeds from sale of equipment 355,956 22,538
---------- ----------
Net cash provided by (used in)
investing activities 355,956 (36,687)
---------- ----------
</TABLE>
(Continued)
<PAGE>
<TABLE>
<CAPTION>
TSW FOODS, INC.
D/B/A POPEYE'S CHICKEN & BISCUITS
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 28, 1997
(Continued)
Six Months
Ended Year Ended
June 30, December 28,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligations $ (4,680) $ (1,560)
Payments on notes payable (253,196) (106,959)
Payments on notes payable to stockholders (106,801) (1,500)
Purchase of treasury stock (25,000) -
---------- ----------
Net cash used in financing activities (389,677) (110,019)
---------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (33,890) 18,165
CASH AND CASH EQUIVALENTS, beginning of year 33,890 15,725
---------- ----------
CASH AND CASH EQUIVALENTS, end of year $ - $ 33,890
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $ 29,292 $ 64,923
========== ==========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING ACTIVITIES:
During the year ended December 28, 1997 TSW
acquired equipment under capital leases
totaling $45,209.
</TABLE>
<PAGE>
TSW FOODS, INC.
D/B/A POPEYE'S CHICKEN & BISCUITS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
TSW Foods, Inc. ("TSW" or the "Company") was incorporated in the State of
Louisiana on December 4, 1984, and is located in Pensacola, Florida. TSW was
formed for the purpose of purchasing fried chicken franchises to operate
"Popeye's Chicken" restaurants in northwest Florida.
FISCAL YEAR END
The Company utilizes a 52/53 week year end and ends its year on the Sunday
closest to December 31. All references to 1997 herein relate to December 28,
1997 and the fiscal year ended December 28, 1997, all references to 1998 herein
relate to June 30, 1998 and the six months ended June 30, 1998.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investments with an original
maturity of three months or less. There were no cash equivalents at December 28,
1997.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the related assets.
INCOME TAXES
TSW accounts for income taxes under the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Deferred
income taxes are determined based on the estimated future tax effects of
differences between the financial statement and the tax basis of assets and
liabilities given the provisions of enacted tax laws. Deferred income tax
provisions and benefits are based on the changes to the asset or liability from
period to period.
<PAGE>
2
TSW has net operating losses ("NOL") available to carryforward as of December
28, 1997 of approximately $350,000 which expire in various years through 2012.
The deferred income tax asset arising from this NOL is approximately $119,000.
Management is unable to determine whether the NOL will more likely than not be
realized due to the uncertainty resulting from the absence of a profitable
operating history. Consequently, management has established a valuation
allowance for the entire deferred income tax asset.
FRANCHISE FEES
Franchise fees are recorded at cost and are being amortized using the
straight-line method over 30 years, the initial term of the related franchise
agreement.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically reviews its valuation for long-lived assets used in
operations when indicators of impairment are present. If the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount, the Company records impairment as required under generally
accepted accounting principles. No such impairment losses were incurred for the
period presented.
USE OF ESTIMATES
Management of TSW has made certain estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets and
liabilities to prepare these financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board ("FASB") SFAS No. 130,
"Reporting Comprehensive Income," and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." SFAS No. 130 establishes standards
for reporting and display of comprehensive income and its components in a
primary financial statement. SFAS No. 131 establishes a new method by which
companies will report operating segment information. This method requires
disclosure of information which is based on the manner in which management
organizes the segments within a company for making operating decisions and
assessing performance. In February 1998, the FASB issued SFAS No. 132,
"Employers' Disclosure about Pensions and Other Post Retirement Benefits" to
revise employers' disclosures about pension and other post retirement benefit
plans. In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-5 ("SOP 98-5"). SOP 98-5 requires that all
non-governmental entities expense costs of start-up activities, including
pre-operating, pre-opening and organization activities, as those costs are
incurred. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. In the opinion of
management, the adoption of these statements will have no material impact on its
financial statements.
<PAGE>
3
INTERIM CONDENSED FINANCIAL STATEMENTS
The accompanying unaudited interim condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission for reporting on Form 10-Q. Pursuant to such rules and
regulations, certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The accompanying unaudited interim
condensed financial statements should be read in conjunction with the Company's
December 28, 1997 financial statements and the notes thereto included elsewhere
herein.
In the opinion of management, the accompanying unaudited interim condensed
consolidated financial statements of TSW contain all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly the financial
position of the Company as of June 30, 1998 and the results of its operations
and cash flows for the six month period ended June 30, 1998. The results of
operations and cash flows for the six month period ended June 30, 1998 are not
necessarily indicative of the results of operations or cash flows which may be
reported for the year ending December 31, 1998.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of December 28, 1997:
Useful
Life Amount
----------- -----------
Equipment 2-10 years $ 405,316
Buildings 30 years 753,840
Leasehold improvements 10-15 years 12,623
Land - 450,939
-----------
1,622,718
Less- Accumulated depreciation and
Amortization (425,233)
-----------
$ 1,197,485
===========
<PAGE>
4
3. NOTES PAYABLE
Notes payable consists of the following as of December 28, 1997:
<TABLE>
<S> <C>
Note payable to a financial institution bearing interest at a rate
of 9%, payable in monthly installments of $11,464, maturing on
November 1, 2005, collateralized by equipment and land. $ 590,142
Line of credit to a financial institution, up to $100,000, bearing
interest at a rate of 10.5%, payable on January 15, 1998,
collateralized by equipment. 100,000
690,142
Less - current portion (188,028)
---------
Notes payable, net of current portion $ 502,114
=========
</TABLE>
Annual maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1998 $ 188,028
1999 96,285
2000 105,317
2001 115,197
2002 126,003
Thereafter 59,312
---------
Total $ 690,142
=========
</TABLE>
4. NOTES PAYABLE TO STOCKHOLDERS
At December 28, 1997, TSW had notes payable to stockholders totaling $664,841.
The notes bear interest at a rate of 11%. Unpaid interest is accreted to the
face value of the related notes. These notes were paid in full in July 1998.
5. COMMITMENTS AND CONTINGENCIES
Future minimum land and building rental commitments for the Company's operating
leases as of December 28, 1997, are as follows:
1998 $ 52,800
1999 52,800
2000 52,800
2001 52,800
2002 52,800
Thereafter 728,950
----------
$ 992,950
==========
Total rent expense for the year ended December 28, 1997 was $56,490.
<PAGE>
5
6. CAPITAL LEASE OBLIGATIONS
During fiscal year 1997, TSW entered into a five year capital lease agreement
for equipment valued at $45,209. As of December 28, 1997, the capital lease
agreements provide for future minimum annual lease payments as follows:
1998 $ 11,304
1999 11,304
2000 11,304
2001 11,304
2002 9,227
----------
54,443
Less - amount representing interest (9,234)
----------
Present value of net minimum capital
lease payments 45,209
Less - current portion (9,360)
----------
Long-term portion $ 35,849
==========
7. RELATED PARTY TRANSACTIONS
In 1997, TSW paid management fees of $21,433 to Plant Specialties, Inc., a
company owned by Leroy Smith, President of TSW Foods, Inc.
8. INCOME TAXES
The provision for income taxes consisted of the following as of December 28,
1997:
Current provision $ 24,430
Deferred benefit (24,430)
---------
$ -
=========
9. SUBSEQUENT EVENT
In July 1998, the stockholders sold, through an asset purchase agreement,
substantial operating assets and liabilities to Interfoods of America, Inc., an
unrelated third party, in exchange for cash and common stock.
