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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the six months ended July 31, 1998
Commission File Number 1-13365
------------------------
INTERCORP EXCELLE INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
ONTARIO, CANADA N/A
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1880 ORMONT DRIVE M9L 2V4
TORONTO, ONTARIO, CANADA (Zip Code)
(Address of principal executive offices)
</TABLE>
(416) 744-2124
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
(Title of Class)
------------------------
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. Yes /X/ No / /
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practical date: September 11, 1998 -- 4,075,000
common shares, no par value.
Transitional Small Business Disclosure Format (check one): Yes / / No /X/.
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as at July 31, 1998 and January 31, 1998.................. 1
Interim Consolidated Statements of Net Income for the three and six months ended July
31, 1998 and 1997..................................................................... 2
Interim Consolidated Statements of Changes in Financial Position for the six months
ended July 31, 1998 and 1997.......................................................... 3
Interim Consolidated Statements of Stockholders' Equity for the six months ended July
31, 1998.............................................................................. 4
Notes to Consolidated Financial Statements............................................ 5 to 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................................ 9 to 10
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS............................................. 11
ITEM 4. MATTERS SUBMITTED TO A VOTE OF SECURITY HOLDERS....................................... 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................................... 12
SIGNATURES............................................................................ 13
</TABLE>
<PAGE>
INTERCORP EXCELLE INC.
CONSOLIDATED BALANCE SHEETS
AS OF JULY 31, 1998 AND JANUARY 31, 1998
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 31, JANUARY 31,
1998 1998
---------- -----------
<S> <C> <C> <C>
$ $
ASSETS
CURRENT ASSETS
Cash and short term investments............................................... Note 1 3,115,066 3,368,790
Accounts Receivable........................................................... Note 1 1,180,111 702,814
Investment Tax Credit Receivable.............................................. 70,455 35,134
Inventory..................................................................... Note 1 791,261 794,956
Income Tax Recoverable........................................................ 0 26,640
Prepaid Expense And Sundry Assets............................................. 136,981 41,877
---------- -----------
Total Current Assets.......................................................... 5,293,874 4,970,211
---------- -----------
PROPERTY, PLANT AND EQUIPMENT................................................. Note 1 2,933,751 2,917,989
---------- -----------
Total Assets.................................................................. 8,227,625 7,888,200
---------- -----------
---------- -----------
CURRENT LIABILITIES
Accounts Payable And Accrued Expenses......................................... 1,330,470 1,165,751
Income Tax Payable............................................................ 48,531 0
Current Portion Of Long Term Debt............................................. 191,374 198,348
Current Portion Of Mortgage Payable........................................... 46,527 48,223
---------- -----------
Total Current Liabilities..................................................... 1,616,902 1,412,322
---------- -----------
LONG TERM DEBT................................................................ 691,276 489,547
MORTGAGE PAYABLE.............................................................. 849,119 904,174
DUE TO DIRECTORS.............................................................. 138,765 143,823
DEFERRED INCOME TAXES......................................................... 130,868 135,637
---------- -----------
Total Liabilities............................................................. 3,426,930 3,085,503
---------- -----------
COMMON STOCK.................................................................. Note 2 3,904,442 3,904,442
RETAINED EARNINGS 1,350,806 1,177,189
CUMULATIVE TRANSLATION ADJUSTMENTS............................................ (454,553) (278,934)
---------- -----------
Total Stockholders' Equity.................................................... 4,800,695 4,802,697
---------- -----------
Total Liabilities and Stockholders' equity.................................... 8,227,625 7,888,200
---------- -----------
---------- -----------
</TABLE>
1
<PAGE>
INTERCORP EXCELLE INC.
INTERIM CONSOLIDATED STATEMENTS OF NET INCOME
FOR THE THREE AND SIX MONTHS ENDED JULY 31, 1998 AND 1997
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
3 MONTHS 6 MONTHS 3 MONTHS 6 MONTHS
ENDED ENDED ENDED ENDED
JULY 31, JULY 31, JULY 31, JULY 31,
1998 1998 1997 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
GROSS SALES.............................................. 3,418,056 6,433,572 3,468,537 6,249,094
Trade Expenditures....................................... 310,967 546,229 280,820 464,251
------------ ------------ ------------ ------------
NET SALES................................................ 3,107,089 5,887,343 3,187,717 5,784,843
Cost of sales............................................ 2,137,920 3,925,661 2,117,527 3,866,654
------------ ------------ ------------ ------------
GROSS PROFIT............................................. 969,169 1,961,682 1,070,190 1,918,189
------------ ------------ ------------ ------------
EXPENSES
Selling.................................................. 537,177 939,672 572,324 971,378
General & Administrative................................. 245,538 503,695 296,299 493,330
Research & Development Costs............................. 74,908 133,977 32,725 58,097
Financial (net of interest income)....................... (12,250) (11,567) 37,150 57,076
Amortization............................................. 94,346 192,544 90,350 181,668
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES................................. 939,719 1,758,321 1,028,848 1,761,549
OPERATING INCOME......................................... 29,450 203,361 41,342 156,640
Gain/(loss) on exchange.................................. 87,306 46,470 0 0
Income Taxes............................................. 30,740 76,214 18,865 55,010
------------ ------------ ------------ ------------
NET INCOME............................................... 86,016 173,617 22,477 101,630
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
NET INCOME PER WEIGHTED AVERAGE COMMON SHARES (Note
2c).................................................... 0.02 0.04 0.01 0.04
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES................. 4,075,000 4,075,000 2,900,000 2,900,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
2
<PAGE>
INTERCORP EXCELLE INC.
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
FOR THE 6 MONTHS ENDED JULY 31, 1998 AND 1997
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
JULY 31, JULY 31,
1998 1997
------------ ------------
<S> <C> <C>
$ $
Cash flows from operating activities:
Net Income.......................................................................... 173,617 101,630
Adjustments to reconcile net income to net cash (used in) provided by operating
activities:
Amortization...................................................................... 192,544 181,668
Gains on disposal property, plant & equipment..................................... 0 (2,903)
Increase in accounts receivable................................................... (520,459) (266,069)
Decrease/(increase) in investments tax credits.................................... (38,165) 69,986
Increase in inventory............................................................. (31,382) (271,729)
Increase in prepaid expenses...................................................... (100,663) (356,476)
Increase in accounts payable...................................................... 218,880 270,624
Change in income taxes payable/recoverable........................................ 77,397 37,738
Increase/(decrease) in deferred income tax........................................ 0 (39,110)
------------ ------------
Total adjustments............................................................... (201,848) (376,271)
------------ ------------
Net cash provided by (used in) operating activities................................... (28,231) (274,641)
------------ ------------
Cash flows from investing activities:
Purchase of property, plant and equipment........................................... (317,524) (367,215)
------------ ------------
Net cash used in investing activities................................................. (317,524) (367,215)
------------ ------------
Financing Activities:
Advance/(Repayment) of Bank Indebtedness............................................ 0 764,725
Mortgage repayments................................................................. (24,205) 0
Bridging Loan....................................................................... 0 621,870
Repayment of long term debt......................................................... (108,695) (204,014)
Proceeds from Long Term Debt........................................................ 336,437 206,141
------------ ------------
Net cash provided by financing activities............................................. 203,537 1,388,722
------------ ------------
Effect of foreign currency exchange rate changes...................................... (111,506) (4,368)
------------ ------------
Net Increase/(Decrease) in cash and Cash Equivalents.................................. (253,724) 742,498
Cash and Cash Equivalents
Beginning of period................................................................... 3,368,790 176,117
------------ ------------
End of period......................................................................... 3,115,066 918,615
------------ ------------
------------ ------------
Income tax refund received............................................................ 1,082 0
Interest paid (Received).............................................................. (12,250) 57,076
</TABLE>
3
<PAGE>
INTERCORP EXCELLE INC.
INTERIM CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JULY 31, 1998
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL CUMULATIVE
COMMON PAID-IN TRANSLATION RETAINED
STOCK CAPITAL ADJUSTMENTS EARNINGS TOTAL
---------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ $ $ $
Balance as of January 1, 1998.................... 3,764,467 139,975 (278,934) 1,177,189 4,802,697
Foreign currency translation..................... -- -- 59,295 -- 59,295
Net Income for the quarter....................... -- -- -- 87,601 87,601
---------- ----------- ----------- ---------- ----------
Balance as of April 30, 1998..................... 3,764,467 139,975 (219,639) 1,264,790 4,949,593
Foreign currency translation..................... -- -- (234,914) -- (234,914)
Net Income for the quarter....................... -- -- -- 86,016 86,016
---------- ----------- ----------- ---------- ----------
Balance as of July 31, 1998...................... 3,764,467 139,975 (454,553) 1,350,806 4,800,695
---------- ----------- ----------- ---------- ----------
---------- ----------- ----------- ---------- ----------
</TABLE>
4
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INTERCORP EXCELLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Intercorp
Excelle Inc. ("the Company") and its wholly owned subsidiary, Intercorp Excelle
Foods Inc. The Company was incorporated on April 18, 1997 by its shareholders of
the purpose of consolidating their 100% interests in anticipation of an initial
public offering. On May 22, 1997, the Company acquired all issued and
outstanding common shares of Intercorp Foods Limited "IFL", Excelle Brands Food
Corporation "EBFC" and Kalmath Investments Limited "KIL" (parent company of
Excelle Brands Food Corporation). On February 1, 1998, IFL and KIL, together
with its wholly-owned subsidiary, EBFC, were amalgamated to form Intercorp
Excelle Foods Inc. All significant transactions and balances among the
consolidated entities have been eliminated in the preparation of these
consolidated financial statements. The consolidated condensed interim financial
statements have been prepared in accordance with Form 10-QSB specifications and,
therefore, do not include all information and footnotes normally shown in full
annual financial statements.
B) PRINCIPAL ACTIVITIES
Each of the companies included in these consolidated financial statements
was incorporated in Canada on the following dates:
Intercorp Excelle Inc.
Intercorp Excelle Foods Inc.*
*(Amalgamated Intercorp Foods Limited which was incorporated on December 20,
1982, Kalmath Investments Ltd. which was incorporated on September 20, 1987 and
Excelle Brands Food Corporation which was incorporated on February 7, 1987)
The subsidiary companies are principally engaged in the production of food
products in Canada and its distribution in Canada and in the U.S.
C) CASH AND SHORT TERM INVESTMENTS (BANK INDEBTEDNESS)
Cash and short term investments include cash on hand, amount due from banks,
and any other highly liquid investments purchased with a maturity of three
months or less. The carrying amount approximates fair value because of the short
maturity of those instruments.
D) OTHER FINANCIAL INSTRUMENTS
The carrying amount of the Company's accounts receivable and payable
approximates fair value because of payable approximates fair value because of
the short maturity of these instruments.
E) LONG-TERM FINANCIAL INSTRUMENTS
The fair value of each of the Company's long-term financial assets and debt
instruments is based on the amount of future cash flows associated with each
instrument discounted using an estimate of what the Company's current borrowing
rate for similar instruments of comparative maturity would be.
5
<PAGE>
INTERCORP EXCELLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
F) INVENTORY
Inventory is valued at lower of cost or net realizable value. Cost is
determined on the first-in, first-out basis.
G) PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<S> <C>
Equipment......................................... 20% declining balance
Leasehold Improvement............................. 10% straight line
Vehicle........................................... 30% declining balance
Computer Equipment................................ 30% declining balance
Office Furniture.................................. 20% declining balance
</TABLE>
Amortization for assets acquired during the period are recorded at one-half
of the indicated rates, which Approximates when they were put into use.
H) INCOME TAXES
The Company accounts for income tax under the provisions of statement of
Financial Accounting Standard No. 109, Which requires recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been in the financial statements or tax returns. Deferred income taxes
are provided using the liability method. Under the liability method, deferred
income taxes are recognized for all significant temporary differences between
the tax and financial statement bases of assets and liabilities.
I) FOREIGN CURRENCY TRANSLATION
The companies maintained their books and records in Canadian Dollars.
Foreign currency transactions are translated using the temporal method. Under
this method, all monetary items are translated into Canadian funds at the rate
of exchange prevailing at balance sheet date. Non monetary items are translated
at historical rates. Income and expenses are translated at the rate in effect of
the transaction dates. Transaction gains and losses are included in the
determination of earnings for the period.
The translation of the financial statements from Canadian dollars ("CDN $")
into United States dollars is performed for the convenience of the reader.
Balance sheet accounts are translated using closing exchange rates in effect at
the balance sheet date and income and expenses accounts are translated using an
average exchange prevailing during each reporting period. No representation is
made that the Canadian dollar amounts could havebeen or could be, converted into
United States dollars at the rates on the respective dates and or at any other
certain rates. Adjustments resulting from the translation are included in the
cumulative translation adjustments in stockholder's equity.
J) SALES
Sales represent the invoiced value of goods supplied to customers. Sales are
recognized upon delivery of goods and passage of title to customers.
6
<PAGE>
INTERCORP EXCELLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
K) GOVERNMENT ASSISTANCE AND INVESTMENT TAX CREDITS
Government Assistance and Investment Tax Credits are recorded on the accrual
basis and are accounted for as a reduction of the related current or capital
expenditures.
L) USE OF ESTIMATES
The preparation of financial statements required management to make
estimates and assumptions that affect certain reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
M) ACCOUNTING CHANGES
On February 1, 1996 the Company adopted the provision of SFAS No.121,
Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed Of. SFAS No. 121 requires that long-lived assets to be held and used
by an entity be reviewed for impairment whenever events or changes in
circumstances indicates that the carrying amount of an asset may not be
recoverable. This statement is effective for financial statements for fiscal
years beginning after December 15, 1995.Adoption of SFAS No. 121 did not have a
material impact on the Company's results of operations.
In December 1995, SFAS No. 123, Accounting for Stock-Based Compensation, was
issued. It introduces a fair value-based method of accounting for stock-based
compensation. It encourages, but does not require, companies to recognized
compensation expenses for stock-based compensation to employees based on the new
fair value accounting rules. Companies that choose not to adopt the new rules
will continue to apply the existing accounting rules contained in Accounting
Opinion No. 25, Accounting for Stock Issued to Employees. However,SFAS No. 123
requires companies that choose not to adopt the new fair value accounting rules
to disclose pro forma net income and earnings per share under the new method.
SFAS No. 123 is effective for financial financial statements for fiscal years
beginning after December15, 1995. The Company has adopted the disclosure
provisions of SFAS No. 123.
2 COMMON STOCK
A) AUTHORIZED
An unlimited number of common and preference shares
The preference shares are issuable in series upon approval by the directors
with the appropriate designation, rights, and conditions attaching to each share
of such series.
ISSUED
<TABLE>
<CAPTION>
JULY 31, 1998 JULY 31, 1997
$ $
------------- -------------
<S> <C> <C>
4,075,000 Common Shares........................................................................ 3,764,467 380
------------- -----
------------- -----
1,399,750 Warrants............................................................................. 139,975 0
------------- -----
------------- -----
</TABLE>
7
<PAGE>
INTERCORP EXCELLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS EXPRESSED IN US DOLLARS)
(UNAUDITED)
2 COMMON STOCK (CONTINUED)
B) STOCK OPTION PLAN
In May, 1997, the board of directors and shareholders adopted the Intercorp
Excelle Inc. Stock Option Plan (the "1997 Plan"), pursuant to which 500,000
shares of common stock are reserved for issuance.
The 1997 Plan will be administered by the compensation committee or the
board of directors, who will determine, those individuals who shall receive
options, the time period during which the options may be partially exercised,
the number of shares of common stock issuable upon the exercise of the options
and the option exercise price.
In May, 1997, the Board granted 200,000 Options under the 1997 Plan to five
individuals, including officers, directors and key employees. The options are
exercisable at $3.50 per share for ten years expiring May 1, 2007. 40% of the
Options are immediately exercisable, an additional 30% become exercisable in
May, 1998 and all the Options are exercisable in November, 1998
In April 1998, the Board granted 30,000 options to key employees and 10,000
options to the Company's independent directors. The options are exercisable at
$5.00 per share for five years expiring April 2003. 40% of the Options are
immediately exercisable, an additional 30% become exercisable in April 1999 and
all the Options are exercisable in April, 2000.
C) EARNINGS PER SHARE
Net Income per common share is computed by dividing net income for the
period by the weighted number of common shares outstanding during the period.
Fully diluted net income per share was the same as the basic net income per
common share for the period ended July 31, 1998 and 1997.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The statements contained in this filing that are not historical are forward
looking statements within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, including
statements regarding the Company's expectations, intentions, beliefs or
strategies regarding the future. All forward looking statements include the
Company's statements regarding liquidity, anticipated cash needs and
availability and anticipated expense levels. All forward looking statements
included in this report are based on information available to the Company on the
date hereof, and the Company assumes no obligation to update any such forward
looking statement. It is important to note that the Company's actual results
could differ materially from those in such forward looking statements.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JULY 31, 1998 COMPARED TO THE SIX MONTHS ENDED JULY 31,
1997.
Revenues for six months ended July 31, 1998 were $6,433,572, a 3.0% increase
over prior year first half revenues of $6,249,094. This increase was primarily
due to growth in Renee's branded business (Renee's Gourmet regular and Naturally
Light-TM- dressing), and food service incremental distribution. Also note, that
actual sales growth in Canadian dollars, net of foreign exchange differentials,
was significantly higher at 8.0%, (based on first half revenues of $9.3million
CDN).
Gross profit for the same six month period of $1,961,682 was 33.3% of net
revenues, which was only slightly favourable compared to the same period one
year ago. This was attributed to higher cost of goods, including canola oil and
packaging which was offset by a favourable mix towards higher margin branded
business as well as improvements in operational efficiency (including lower
manufacturing conversion costs and distribution). Gross margins were not
affected by price changes, which, for the most part, remained unchanged, as
compared to the prior year.
Selling and marketing expenses of $939,672 for the first half of the fiscal
year were for the most part in line with the first six months of 1997,
reflecting management's decision to delay Renee's new sauces launch until the
start of the third quarter of the current fiscal year. General and
administrative expenses of $503,695 were slightly higher than prior year,
reflecting increased wages and benefits.
Research and development expenses of $133,977 during the first six months of
the fiscal year were more than double versus the same period one year ago,
tracing to overall higher spending levels and reduced research and development
tax credits accrued. Financial costs included a high amount of interest income
on funds invested in interest bearing accounts.
Operating income increased substantially by $46,721 to $203,361 for the six
months ended July 31, 1998 versus prior year. Although a portion of this
incremental profitability is timing related only, this improvement is directly a
result of continued sales growth, and marginally improved gross margins, which
more than offset an additional investment in research and development, and
administrative overheads.
The Company reported a translation gain of $46,470 on US funds converted
from Canadian dollars as at the end of the first half of the fiscal year. The
Company's functional currency is Canadian dollars, and is converted into US
currency for reporting purposes.
Net income improved by 71% in the first half of fiscal 1998, to $173,617,
primarily due to translation gains and incremental sales growth.
9
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LIQUIDITY AND CAPITAL RESOURCES
The Company has a cash outflow from operations of $28,231 for the six months
ending July 31, 1998. The principal source of cash traced to reported net income
of $173,617 and an increase in accounts payable and accrued liabilities. This
was offset by cash used to increase inventories, prepaids and an increase in
accounts receivable at the end of the period. This is favourable to prior year,
in which the Company generated a net operating cash outflow of $274,642, which
also traced to inventories, prepaids and accounts receivable.
Capital spending during the six months ending July 31, 1998 totaled $317,524
which is lower than the prior year, most of which is timing only.
The Company's secured credit arrangement with National Bank of Canada was
re-negotiated during the second quarter of this fiscal year. This new facility
includes a credit line of Cdn$1.0million that is due on demand and bears
interest at prime plus 1.0% plus an additional Cdn$740,000 capital loan to cover
current year capital expenditures. All borrowings are collateralized by the
assets of the Company.
The Company received net proceeds of an initial public offering effective
October 9, 1997 in a net amount of $3,799,062. The Company believes that the
proceeds of the offering, coupled with income from operations will fulfill the
Company's working capital needs for at least the next two years. It is the
Company's intention to utilize a significant portion of the proceeds to
aggressively seek synergistic acquisitions. The Company also intends to support
its branded Renee's business through increased marketing, advertising and
distribution throughout North America. As the Company continues to grow, bank
borrowings, other debt placements and equity offerings may be considered, in
part, or in combination, as the situation warrants.
10
<PAGE>
PART II OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company made an initial public offering of its common stock, no par
value ("Common Stock") and common stock purchase warrants ("Warrants") (the
Common Stock and Warrants are collectively referred to as the "Securities")
pursuant to a registration statement declared effective by the Commission on
October 9, 1997, File No. 333-7202 ("Registration Statement"). Each Warrant
permits the holder, upon exercise, to receive one share of the Company's common
stock, no par value.
The following are the Company's expenses incurred in connection with the
issuance and distribution of the Securities in the offering from the effective
date of the Registration Statement to the ending date of the reporting period of
this 10-QSB:
<TABLE>
<CAPTION>
EXPENSE AMOUNT
- -------------------------------------------------------------------------------- ------------
<S> <C>
Underwriter's Discounts and Commissions......................................... $ 512,247
Finders Fees.................................................................... 0
Expenses paid to or for the Underwriters........................................ 241,674
Other expenses (1).............................................................. 569,492
Total Expenses.................................................................. $ 1,323,413
</TABLE>
- ------------------------
(1) Estimate
None of the foregoing expenses were paid, directly or indirectly, to any
director or officer of the Company or their associates, to any person who owns
10 percent or more of any class of equity securities of the Company, or to any
affiliate of the Company.
The net offering proceeds to the Company after deducting for the foregoing
expenses are $3,799,062.
The following are the application of the net proceeds by the Company from
the sale of the Securities in the offering from the effective date of the
Registration Statement to the ending date of the reporting period of this
10-QSB:
<TABLE>
<CAPTION>
ITEM AMOUNT
- -------------------------------------------------------------------------------- ------------
<S> <C>
Purchase of Building............................................................ $ 408,676
Temporary Investments (1)....................................................... 2,735,386
Repayment of Indebtedness....................................................... 655,000
Total Application of Net Proceeds............................................... $ 3,799,062
</TABLE>
- ------------------------
(1) Money market investments
None of the foregoing application of the net proceeds were paid, directly or
indirectly, to any director or officer of the Company or their associates, to
any person who owns 10 percent or more of any class of equity securities of the
Company, or to any affiliate of the Company.
The application of the net proceeds to date is not a material change in the
use of proceeds described in the prospectus in the Registration Statement.
11
<PAGE>
ITEM 4. MATTERS SUBMITTED TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of stockholders on July 15, 1998. The
purpose of the meeting was to vote for the election of directors ("Proposal 1")
and to ratify the appointment of Schwartz, Levitsky, Feldman, Chartered
Accountants, as the Company's independent certified public accountants
("Proposal 2").
Proposal 1--The following seven persons were elected to serve as directors
of the Company for the ensuing year: Arnold Unger, Renee Unger, Fred Burke, Lori
Gutmann, Alysee Unger, John Rothschild and Taketo Murata. There were 3,893,400
votes cast in favor, 0 votes against and 3,000 votes withheld for each of the
above named directors.
Proposal 2--The proposal to ratify Schwartz, Levitsky, Feldman, Chartered
Accountants, as the Company's independent certified public accountants for the
ensuing year was approved. There were 3,886,400 votes cast in favor, 0 votes
against and 10,000 votes withheld for the proposal.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<S> <C> <C>
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
</TABLE>
12
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
<TABLE>
<S> <C> <C>
INTERCORP EXCELLE, INC.
By: /s/ ARNOLD UNGER
-----------------------------------------
Arnold Unger
CHIEF EXECUTIVE OFFICER AND
September 14, 1998 CO-CHAIRPERSON
By: /s/ RENEE UNGER
-----------------------------------------
Renee Unger
September 14, 1998 PRESIDENT AND CO-CHAIRPERSON
By: /s/ FRED BURKE
-----------------------------------------
Fred Burke
CHIEF FINANCIAL OFFICER, CHIEF
September 14, 1998 OPERATING OFFICER, SECRETARY
</TABLE>
13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<C> <S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS INCLUDED IN
THE REGISTRANT'S FORM 10-QSB FOR THE QUARTER ENDED JULY 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> JUL-31-1998
<CASH> 3,115,066
<SECURITIES> 0
<RECEIVABLES> 1,180,111
<ALLOWANCES> 0
<INVENTORY> 791,261
<CURRENT-ASSETS> 5,293,874
<PP&E> 2,933,751
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,227,625
<CURRENT-LIABILITIES> 1,616,902
<BONDS> 0
0
0
<COMMON> 3,904,442
<OTHER-SE> 896,253
<TOTAL-LIABILITY-AND-EQUITY> 8,227,625
<SALES> 3,107,089
<TOTAL-REVENUES> 3,418,056
<CGS> 2,137,920
<TOTAL-COSTS> 939,719
<OTHER-EXPENSES> 87,306
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (12,250)
<INCOME-PRETAX> 116,756
<INCOME-TAX> 30,740
<INCOME-CONTINUING> 86,016
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,016
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
