SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM ______________ TO ________________
Commission File No. 333-22997
SPECTRUM ORGANIC PRODUCTS, INC.
-------------------------------
(Exact name of small business issuer as specified in its Charter)
California 94-3076294
---------- ----------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) Number)
133 Copeland Street
Petaluma, California 94952
- ------------------------ -----
(Address of principal executive offices) (Zip Code)
(707)778-8900
-------------------------
Issuer's telephone number
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ X ] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan conformed by court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: Common Stock, no par value,
43,914,186 shares as of May 9, 2000. Transitional Small Business Disclosure
Format: Yes [ ] No [ X ]
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENT
- ----------------------------
SPECTRUM ORGANIC PRODUCTS, INC.
BALANCE SHEET
ASSETS
(Unaudited)
March 31,
2000
-----------
Current Assets:
Cash $ 1,100
Accounts receivable, net 4,439,600
Inventories, net 5,946,900
Income tax refunds receivable 31,100
Prepaid expenses and other current assets 223,900
-----------
Total Current Assets 10,642,600
Property and Equipment, net 3,939,900
Other Assets:
Goodwill, net 10,006,600
Other intangible assets, net 83,900
Other assets 156,200
-----------
Total Assets $24,829,200
===========
The Accompanying Notes are an Integral Part
of the Financial Statements
2
<PAGE>
SPECTRUM ORGANIC PRODUCTS, INC.
BALANCE SHEET (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
March 31,
2000
------------
Current Liabilities:
Bank Overdrafts $ 675,200
Lines of credit 5,438,700
Current maturities of notes payable, former
Stockholder 400,000
Current maturities of notes payable and
capitalized lease obligations 1,604,000
Current maturities of notes payable, stockholders 271,800
Accounts payable, trade 5,888,800
Accrued expenses 778,800
Income taxes payable --
------------
Total Current Liabilities 15,057,300
Notes payable, former stockholder, less current
maturities 1,212,100
Notes payable and capitalized lease obligations,
less current maturities 147,600
Notes payable, stockholders, less current
maturities 371,600
------------
Total Liabilities 16,788,600
------------
Stockholders' Equity:
Preferred stock, 5,000,000 shares authorized,
no shares issued or outstanding --
Common stock, without par value, 60,000,000
shares authorized, 43,914,186
issued and outstanding at March 31,2000 8,296,600
Additional paid-in capital 185,500
Accumulated (deficit) retained earnings (441,500)
------------
Total Stockholders' Equity 8,040,600
------------
Total Liabilities and Stockholders' Equity $ 24,829,200
============
The Accompanying Notes are an Integral Part
of the Financial Statements
3
<PAGE>
SPECTRUM ORGANIC PRODUCTS, INC.
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
March 31, March 31,
2000 1999
------------ ------------
Gross Sales $ 11,424,800 $ 6,506,400
Discounts and Allowances 417,600 355,100
------------ ------------
Net Sales 11,007,200 6,151,300
Costs of Goods Sold 7,973,600 4,194,300
------------ ------------
Gross Profit 3,033,600 1,957,000
------------ ------------
Operating Expenses:
Promotion and Advertising 1,837,600 905,200
General And Administrative Expenses 1,090,100 582,300
Amortization of Goodwill 219,000 --
------------ ------------
Total Operating Expenses 3,146,700 1,487,500
------------ ------------
Income (Loss) from Operations (113,100) 469,500
Other Income (Expense):
Interest Expense, net (309,100) (102,600)
Gains/Losses on Sale of Assets 50,000 --
Other Loss (1,100) --
------------ ------------
Total Other Expenses (260,200) (102,600)
------------ ------------
Income (Loss) Before Income Taxes (373,300) 366,900
Provision For Income Tax Expense -- (130,500)
============ ============
Net Income (Loss) ($ 373,300) $ 236,400
============ ============
Basic and Diluted (Loss) Earnings Per Share $ (0.01) $ 0.01
============ ============
Weighted Average Shares Outstanding 43,914,186 32,336,547
============ ============
The Accompanying Notes are an Integral Part
Of the Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
SPECTRUM ORGANIC PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31, March 31,
2000 1999
------------ ------------
<S> <C> <C>
Net (Loss) Income $ (373,300) 236,400
Adjustments To Reconcile Net (Loss) Income To Net
Cash (Used in) Provided by Operating Activities
Provision for allowances against receivables 15,100 36,800
Provision for reserves for inventory obsolescence
Depreciation and amortization 208,900 78,100
Amortization of goodwill 219,000 --
Gain on disposal of product line (50,000) --
Imputed interest on note payable, former stockholder 18,800 7,000
Increase in cash surrender value of life insurance -- (8,900)
Amortization of original issue discount on unsecured
subordinated notes 55,200
Changes in Assets and Liabilities
Accounts receivable (810,200) (606,900)
Inventories 638,800 105,900
Prepaid expenses and other current assets (35,800) (124,700)
Other assets (1,200) (10,000)
Accounts payable (255,600) 704,900
Accrued expenses (280,700) (20,900)
Income tax payable (13,300) 111,500
Other -- (15,000)
------------ ------------
Net Cash (Used in) Provided by Operating Activities (664,300) 494,200
------------ ------------
Cash flows from Investing Activities:
Purchase of property and equipment (89,900) (324,300)
Trademark and label development -- (31,300)
Proceeds from sale of assets 50,000 --
------------ ------------
Net Cash Used in Investing Activities (39,900) (355,600)
------------ ------------
Cash Flows From Financing Activities:
Proceeds from bank overdraft 445,900 (74,100)
Proceeds from lines of credit 11,002,900 --
Repayment of lines of credit (10,502,200) (325,500)
Repayment of notes payable, former stockholder (93,800) --
Repayment of notes payable to stockholders (68,600) --
Proceeds of notes payable 60,000 621,300
Repayment of notes payable (130,500) (72,700)
Repayment of capitalized lease obligations (10,100) (9,500)
Warrants exercised 600 --
------------ ------------
Net Cash Provided by Financing Activities 704,200 139,500
------------ ------------
Net Increase In Cash 0 278,100
Cash, beginning of the year 1,100 500
------------ ------------
Cash, end of the period $ 1,100 $ 278,600
============ ============
Supplemental Disclosure of Cash Flow Information:
Cash paid for income taxes $ 1,400 $ 34,700
Cash paid for interest $ 225,900 $ 105,800
============ ============
The Accompanying Notes are an Integral Part
of the Financial Statements
5
</TABLE>
<PAGE>
SPECTRUM ORGANIC PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Interim Financial Statements:
The unaudited interim financial statements include all adjustments
(consisting of normal recurring accruals) which, in the opinion of
management, are necessary in order to make the financial statements not
misleading. Operating results for the three-month period ended March 31,
2000 are not necessarily indicative of the results that may be expected for
the entire year ending December 31, 2000. These financial statements have
been prepared in accordance with the instructions to Form 10-QSB and do not
contain certain information required by generally accepted accounting
principles. These statements should be read in conjunction with Spectrum
Organic Products, Inc. financial statements and notes thereto included in
the Company's Form 10-KSB for the year ended December 31, 1999.
2. Business Combination
On October 6, 1999, Spectrum Naturals, Inc. ("SNI") and Organic
Ingredients, Inc. ("OI"), both California corporations, were merged with
and into Organic Food Products, Inc. (OFPI), also a California corporation.
Effective with the merger, the newly combined entity changed its name to
Spectrum Organic Products, Inc. Together, SNI prior to the merger and the
combined companies after the merger are referred to as "the Company" or
"SPOP".
As a result of the merger, SNI stockholders received 4,699.53 shares of
OFPI stock in exchange for each share of SNI stock previously held, for a
total of 32,336,495 shares representing approximately 73.8% of the
outstanding common stock after the merger. OI stockholders received 39.5
shares of OFPI stock in exchange for each share of OI stock previously
held, for a total of 3,950,000 shares representing approximately 9.0% of
the outstanding common stock after the merger. Existing OFPI stockholders
held 7,275,665 of the outstanding shares, or approximately 17.2% of the
common stock outstanding after the merger. Since a controlling interest in
the combined company is held by former SNI stockholders after the merger,
the transaction was accounted for as a reverse merger, with SNI as
accounting acquirer and OFPI and OI as accounting acquirees.
Accordingly, the financial statements present the historical results of SNI
as accounting acquirer for all periods presented. Results of operations for
OFPI and OI are included from October 6, 1999 forward. Numbers of shares
and per-share amounts have been retroactively restated where applicable for
all periods presented.
3. Commitments and Contingencies
Litigation and Settlements
--------------------------
In 1998, a company that had provided management consulting services for
OFPI filed suit alleging unpaid wages and seeking money damages and
injunctive relief. In April 2000, a settlement was reached with this
company, who is also a stockholder. Under the terms of the settlement and
release, SPOP would pay Global Natural Brands, Ltd. a total consideration
of $145,000, payable $25,000 upon execution of the agreement by Global and
6
<PAGE>
SPECTRUM ORGANIC PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
twelve equal monthly payments of $10,000, plus $400,000, payable through a
transfer of 400,000 shares of SPOP stock. In addition, SPOP shall issue
options to purchase 125,000 shares at $2.25 per share. Management believes
that the terms of this settlement will not have a significant effect upon
the Company's financial position, results of operations or cash flows.
In 1998, OFPI acquired certain natural fruit juice and water bottling
operations for cash and common stock. Portions of the common stock
consideration were contingent upon earnout factors for the year following
the purchase. An estimated accrual of $156,900 for common shares to be
released is included in accrued liabilities at March 31, 2000. The shares
have not been released, however, as negotiations with the seller regarding
the number of shares to be issued are ongoing. Management believes that the
outcome will not have a material effect upon the Company's financial
position, results of operations or cash flows upon settlement.
Liquidity
---------
At March 31, 2000, the Company has negative working capital and is in
technical default of certain loan covenants. Although no assurances can be
given, Management is currently in negotiations with the bank to formulate
new financial covenants and believes that upon completion of those
negotiations, the Company will be back in compliance. In addition, the
majority shareholder, who holds approximately 70% of the outstanding common
stock of the Company, has represented that he has the intent and ability to
support the operations of the Company with additional funding for the next
fiscal year, as and if necessary.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- -------------------------------------------------------------------------------
The following discussion should be read in conjunction with the financial
statements and related notes and other information included in this report. The
financial results reported herein do not necessarily indicate the financial
results that may be achieved by the Company in any future period.
Introduction
On October 6, 1999, Spectrum Naturals, Inc. ("SNI") and its affiliate,
Spectrum Commodities, Inc. ("SCI"), and Organic Ingredients, Inc. ("OI"),
California corporations were merged with and into Organic Food Products, Inc.
(the "Registrant"), (collectively "SPOP" or the "Company"), pursuant to the
Agreement and Plan of Merger and Reorganization, dated May 14, 1999 (the
"Merger").
As a result of the Merger, SNI stockholders received 4,669.53 shares of
OFPI stock in exchange for each share of SNI stock previously held, for a total
of 32,336,495 shares representing approximately 73.8% of the outstanding common
stock after the merger. OI stockholders received 39.5 shares of OFPI stock in
exchange for each share of OI stock previously held, for a total of 3,950,000
shares representing approximately 9.0% of the outstanding common stock after the
7
<PAGE>
merger. Existing OFPI stockholders held 7,275,665 of the outstanding shares, or
approximately 17.2% of the common stock outstanding after the merger. Since a
controlling interest in the combined company is held by former SNI stockholders
after the merger, the transaction was accounted for as a reverse merger, with
SNI as accounting acquirer and OFPI and OI as accounting acquirees. Accordingly,
operating results for fiscal year 1999 reflect those of SNI only. Operating
results for fiscal 1999 reflect SNI only from January 1, 1999 through March 31,
1999 and the newly merged entity from January 1, 2000 through March 31, 2000.
Upon the effectiveness of the Merger, SNI and OI ceased to exist; the
Registrant became the surviving corporation and the Company changed its name to
"Spectrum Organic Products, Inc."
The Company's operating results could vary from period to period as a
result of a number of factors. These factors include, but are not limited to,
the purchasing patterns of significant customers, the timing of new product
introductions by the Company and its competitors, the amount of slotting fees
and new product development and advertising expenses incurred by the Company,
variations in sales by distribution channels, fluctuations in market prices of
raw materials, competitive pricing policies, and situations that the company
cannot foresee. These factors could cause the Company's performance to differ
from investor expectations, resulting in volatility in the price of the Common
Stock.
Investors should carefully consider the following information as well as
other information contained in this Report. Information included in this Report
contains "forward-looking statements" which can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "should" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. No assurance can be given that the
future results covered by the forward-looking statements will be achieved. The
following matters constitute cautionary statements identifying important factors
with respect to such forward-looking statements, including certain risks and
uncertainties that could cause actual results to vary materially from the future
results covered in such forward-looking statements. Other factors could also
cause actual results to vary materially from the future results covered in such
forward-looking statements.
- --------------------------------------------------------------------------------
Results of Operations for the Three Months Ending March 31, 2000 and March 31,
1999
- --------------------------------------------------------------------------------
Net Results
Spectrum Organic Products, Inc. ("SPOP" or the "Company") reported a net
loss of $373,300 for the quarter ended March 31, 2000 ("2000"), compared to net
income of $236,400 for the quarter ended March 31, 1999 ("1999"). The net loss
in 2000 was due primarily to lower gross margins and increased selling and
administrative expenses, partially offset by increased revenues, reflecting the
operations of the merged companies.
8
<PAGE>
Revenues
SPOP's net sales for the quarter ended March 31, 2000 were $11,424,800
compared to $6,506,400 for 1999, an increase of $4,918,400, or 75.6% over 1999.
The increase in sales in 2000 consists primarily of the revenues relating to the
newly merged OFPI and OI. Excluding the incremental revenues of the product
lines obtained with these companies, SNI's comparable sales increased 9.1% from
1999 reflecting growth in supplemental and industrial ingredient product
categories. With the merger, the proportion of industrial ingredient sales to
total sales increased with a comparable decline in the proportion of retail and
supplemental sales.
Discounts decreased from 5.5% of gross revenues in 1999 to 3.7% of gross
revenues in 2000. The decrease reflects the higher proportion of industrial
ingredient sales and more targeted programs in the supplemental business.
Cost of Goods Sold
SPOP's cost of goods sold for 2000 was $7,973,600 or 72.4% of sales, versus
$4,194,300, or 68.2% of sales for 1999. The increase in cost of goods sold as a
percentage of sales was due primarily to the higher proportion of lower margin
industrial ingredient sales and higher fixed manufacturing costs for products
acquired from OFPI.
Management is in process of evaluating organizational changes and
alternatives to reduce manufacturing and distribution costs in connection with
the merger. As a result, Management believes SPOP's operations should become
more efficient and unit costs will decrease by the end of the 2000 fiscal year,
producing reductions in cost of goods sold as a percentage of sales in
subsequent periods.
Sales and Marketing Expenses
SPOP's sales and marketing expense for 2000 was $1,837,600, or 16.7% of
sales, versus $905,200 or 14.7% of sales for 1999. The increase in sales and
marketing expense reflected an increase in personnel and related costs required
to build a sales organization to support the higher sales anticipated with the
merger. Promotion costs increased as a percentage of sales reflecting programs
targeted to regain lost market share of OFPI brands and counter competitive
pressures in the market place. The Company anticipates the newly organized sales
organization, targeted market spending and the introduction of new products,
will enable the Company to increase its market share in certain categories.
General and Administrative Expenses
SPOP's general and administrative expenses for 2000 were $1,090,100, or
9.9% of sales, versus $582,300 or 8.9% of sales for 1999. The increase in 2000
reflected the increased personnel and expenses associated and required to
service the new larger organization. The Company completed the integration of
the companies during the first quarter and Management believes that general and
administrative expenses will decrease in dollars and as a percentage of sales as
efficiencies are achieved.
Amortization of Goodwill
The Company recorded goodwill of $10,443,000 in connection with the Merger,
which is amortized over 12 years. Included in 2000 is $219,000 of amortization
expense for the period January 1, 2000 to March 31, 2000.
9
<PAGE>
Net Interest Expense
SPOP's interest expense for 2000 was $309,100 versus $102,600 for 1999. The
increase in interest expense resulted from higher utilization of the revolving
credit line. The additional borrowing was used to pay past due vendors at OFPI,
fund the reduction in the Company's term debt as a result of the refinancing and
fund post merger operating losses. (See Liquidity and Capital Resources).
Year 2000 Compliance
SPOP completed a plan to identify all computer hardware and software, plant
equipment and services upon which it relies that may have been impacted by the
year 2000 problem by December 31, 1999. After identification of the problem
areas, the Company verified or took action to ensure those products or services
were year 2000 compliant. As a result of this action, the Company was year 2000
compliant in advance of December 31, 1999.
Issues similar to these also faced the Company's customers and vendors.
While the Company had not completed an assessment of year 2000 readiness of its
customers and vendors, from conducting business following December 31, 1999,
management believes that business with those customers and vendors was not
significantly disrupted by the year 2000 problem.
Seasonality
Historically, the Company has experienced little seasonal fluctuation in
revenues. In relation to product purchasing, the Company will seasonally
contract for certain products for the entire year at harvest time, or at
planting time, to secure raw materials throughout the year. These purchases take
place annually from early spring to mid-summer and are effected to reduce the
risk of price swings due to demand fluctuations. These annual purchases can
create overages and shortages in inventory.
Liquidity and Capital Resources
In connection with the merger, the Company paid down the existing debt and
lines of credit of SNI, OFPI and OI with a new loan facility totaling
$11,717,000 with Wells Fargo Business Credit. The new facility, consisting of
term debt and a revolving line of credit, is collateralized by substantially all
assets of the newly combined group, and bears interest at prime plus 1% to 1
1/4%. The balance of the initial proceeds was used for working capital purposes,
to purchase raw materials and equipment, to pay certain Merger related
commitments, and to provide marketing funds to introduce new products and to
introduce existing products into new markets.
Advances under the new revolving line of credit will be limited to a
borrowing base consisting of certain accounts receivable and/or inventory.
Included in the facility are two term notes of $1,067,000 and $150,000 requiring
payment over 60 and 18 months, respectively, and a capital expenditure note of
up to $1,500,000 to be repaid over 60 months beginning in August 2000. Due to
operating losses following the merger, the Company is in default of certain
financial covenants that were based on financial projections made at the time
the facility was put in place. Management is seeking from the bank waivers and a
reset of covenants to more accurately match the Company's financial condition.
Also in connection with the Merger, the Company completed a Private
Placement of 16 Units in October 1999. Each Unit consisted of a $25,000
unsecured and subordinated promissory note bearing interest of 10%, plus
warrants to purchase 10,000 shares of Common Stock at $.01 per share from
10
<PAGE>
January 1, 2000 to September 30, 2000. Net proceeds of approximately $370,000
were received, after offering expenses of approximately $30,000. As of April 1,
2000, the Company was in default on the repayment of the promissory notes. As a
condition of the default the accrued interest is added to the principal, the
interest rate increased to 15% and the note holders are granted 2,500 warrants
per unit for each month the principal is not paid up to six months. The warrants
granted due to the default have the same terms as those granted with the
promissory notes.
The Company is currently seeking additional capital from such potential
sources as refinancing the existing term debt, sale of certain low producing
assets and issuance of common stock. Management believes that the new credit
facility and proceeds from the new sources of capital, if obtained, coupled with
anticipated cost savings in the area of manufacturing, should provide adequate
funds to meet the Company's estimated cash requirements for the year ending
December 31, 2000. There can be no assurances that all of the anticipated
savings can be attained by year-end or that additional capital will be available
on acceptable terms. However, the majority shareholder has indicated that he has
the intent and ability to support the operations of the Company with additional
funding for the next fiscal year, if needed.
The Company's cash at March 31, 2000 was $1,100 compared to $1,100 in 1999.
During 2000, the Company used $664,300 in cash for operating activities,
compared to providing $494,200 in cash in 1999. The use of cash included funding
operating losses and higher accounts receivable levels, partially offset by a
decrease in inventory levels during the quarter. Cash used in investing
activities was $39,900 in 2000 compared to $355,600 in 1999, reflecting higher
purchases of fixed assets in 1999. Cash provided by financing activities was
$704,200 in 2000 compared to $139,500 in 1999. The increase in funds provided
from financing reflected an increase in proceeds from bank overdraft, notes
payable and lines of credit in 2000.
The Company's future results of operations and the other forward-looking
statements contained in this document, in particular the statements concerning
plant efficiencies and capacities, capital spending, research and development,
competition, marketing and manufacturing operations and other information
provided herein involve a number of risks and uncertainties. In addition to the
factors discussed above, other factors that could cause actual results to differ
materially are general business conditions and the general economy; competitors'
pricing and marketing efforts; availability of third-party material products at
reasonable prices; risk of nonpayment of accounts receivable; risks of inventory
obsolescence due to shifts in market demand; timing of product introductions;
and litigation involving product liabilities and consumer issues.
New Applicable Account Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS 133 requires
companies to recognize all derivatives contracts as either assets or liabilities
in the balance sheet and to measure them at fair value. If certain conditions
are met, a derivative may be specifically designated as a hedge, the objective
of which is to match the timing of gain or loss recognition on hedging the
derivative with the recognition of (i) the changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk or (ii) the
earnings' effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change. SFAS 133 as amended is effective for all fiscal quarters
of fiscal years beginning after June 15, 2000.
11
<PAGE>
Historically, the company has not entered into derivative contracts either
to hedge existing risks or for speculative purposes. Accordingly, the Company
does not expect adoption of this new standard on July 1, 2000 to affect its
financial statements or results of operations.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
In November 1998, Global Natural Brands, Inc.("Global")and its four
principals filed a lawsuit against OFPI (the former Registrant) and its four
principals, alleging unpaid wages and seeking money damages and injunctive
relief. Global had provided managerial services to OFPI from April 1998 to
October 1998, when OFPI terminated its services. In January 1999, Global amended
its complaint by including securities fraud claim, among other causes of action.
Meanwhile, Global sought to obtain a temporary restraining order, a preliminary
injunction and a writ of attachment against Organic without success.
In May 1999, OFPI and its principals cross-complained against Global and
its principals, seeking damage for breach of contract, breach of fiduciary duty,
fraud, negligence and a declaratory relief for indemnity and contribution, plus
punitive damages.
SPOP assumed the litigation in connection with the Merger and in April,
2000, reached a settlement and release with Global. Under the terms of the
settlement and release, SPOP would pay Global Natural Brands, Ltd, total cash
consideration of $145,000, payable $25,000 upon execution of the agreement by
Global and twelve equal monthly payments of $10,000, plus $400,000, payable
through a transfer of 400,000 shares of SPOP stock. In addition, SPOP shall
issue options to purchase 125,000 shares at $2.25 per share. Management believes
that the terms of this settlement will not have a significant effect upon the
Company's financial position, results of operations or cash flows.
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
- -------------------------
None.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
None
12
<PAGE>
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.
Date: May 15, 2000
SPECTRUM ORGANIC PRODUCTS, INC.
By: /s/ Larry Lawton
---------------------
Larry Lawton
Chief Accounting Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-2000
<CASH> 1,100
<SECURITIES> 0
<RECEIVABLES> 4,865,500
<ALLOWANCES> 425,900
<INVENTORY> 5,946,900
<CURRENT-ASSETS> 10,642,600
<PP&E> 5,903,500
<DEPRECIATION> 1,963,600
<TOTAL-ASSETS> 24,829,200
<CURRENT-LIABILITIES> 15,057,300
<BONDS> 0
0
0
<COMMON> 8,296,600
<OTHER-SE> (256,000)
<TOTAL-LIABILITY-AND-EQUITY> 24,829,200
<SALES> 11,424,800
<TOTAL-REVENUES> 11,424,800
<CGS> 7,973,600
<TOTAL-COSTS> 7,973,600
<OTHER-EXPENSES> 48,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 309,100
<INCOME-PRETAX> (373,300)
<INCOME-TAX> 0
<INCOME-CONTINUING> (373,300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (373,300)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
