<PAGE>
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 three months ended April 30, 2000
Commission File Number 1-13365
-----------
INTERCORP EXCELLE INC.
(Exact name of Small Business Issuer as specified in its charter)
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)
(416) 744-2124
(Issuer'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 issuer: (1) 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 [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity as of the latest practical date: June 15, 2000 - 4,000,761
common shares, no par value.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Interim Consolidated Balance Sheets as at April 30, 2000 and January 31, 2000 1
Interim Consolidated Statements of Income for the three months ended 2
April 30, 2000 and 1999
Interim Consolidated Statements of Cash Flows for the three months ended 3
April 30, 2000 and 1999
Interim Consolidated Statements of Stockholders' Equity for the three months 4
ended April 30, 2000
Notes to Interim Consolidated Financial Statements 5 - 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12-13
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 14
Item 6. Exhibits and reports on Form 8-K 15
Signatures 16
</TABLE>
<PAGE>
Item 1. Financial Statements
INTERCORP EXCELLE INC.
Interim Consolidated Balance Sheets
As at April 30, 2000 AND January 31, 2000
(Amounts expressed in US Dollars)
(Unaudited)
<TABLE>
<CAPTION>
April 30, January 31,
2000 2000
$ $
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short term investments Note 1(c) 2,090,315 1,749,012
Accounts receivable Note 1(d) 1,595,613 1,332,659
Investment tax credit recoverable 105,749 99,230
Inventory Note 1(f) 1,650,780 1,527,818
Income tax recoverable 25,042 35,043
Prepaid expenses and sundry assets 139,251 77,847
---------------------------------
Total current assets 5,606,750 4,821,609
PROPERTY, PLANT AND EQUIPMENT Note 1(g) 3,514,479 3,546,530
INTANGIBLE ASSET Note 1(i) 804,967 828,042
---------------------------------
Total Assets 9,926,196 9,196,181
=================================
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities Note 1(d) 2,472,450 2,029,487
Current portion of long term debt 222,889 227,335
Current portion of mortgage payable 47,371 48,316
---------------------------------
Total current liabilities 2,742,710 2,305,138
LONG TERM DEBT 808,723 443,550
MORTGAGE PAYABLE 781,620 809,290
DUE TO DIRECTORS 123,315 125,775
DEFERRED INCOME TAXES Note 1(i) 194,596 198,478
---------------------------------
Total Liabilities 4,650,964 3,882,231
---------------------------------
STOCKHOLDERS' EQUITY
COMMON STOCK Note 3(a) 3,344,522 3,344,522
ADDITIONAL PAID IN CAPITAL Note 3(b) 505,496 505,496
RETAINED EARNINGS 1,834,975 1,769,232
TREASURY STOCKS Note 4 (34,848) (35,543)
CUMULATIVE TRANSLATION ADJUSTMENTS (374,914) (269,757)
---------------------------------
Total Stockholders' Equity 5,275,231 5,313,950
---------------------------------
Total Liabilities and Stockholders' Equity 9,926,195 9,196,181
=================================
</TABLE>
Page 1
<PAGE>
INTERCORP EXCELLE INC.
Interim Consolidated Statements Of Income
For the three months ended April 30, 2000 and 1999
(Amounts expressed in US Dollars)
(Unaudited)
<TABLE>
<CAPTION>
3 months ended 3 months ended
April 30, 2000 April 30, 1999
$ $
<S> <C> <C>
GROSS SALES (Note 1 (j) 4,239,923 3,257,955
Trade Expenditures 355,904 248,288
---------------------------------------
NET SALES 3,884,019 3,009,667
Cost of sales 2,610,282 2,006,686
---------------------------------------
GROSS PROFIT 1,273,737 1,002,981
---------------------------------------
EXPENSES
Selling 575,958 441,775
General & administrative 390,940 326,776
Research & development costs 95,946 61,451
Financial (net of interest income) 14,255 10,076
Amortization 130,815 92,043
---------------------------------------
TOTAL OPERATING EXPENSES 1,207,914 932,121
---------------------------------------
OPERATING INCOME 65,823 70,860
Gain/(loss) on exchange 20,388 (74,669)
--------------------------------------
INCOME BEFORE INCOME TAXES 86,211 (3,809)
Income taxes 20,468 -
---------------------------------------
NET INCOME 65,743 (3,809)
=======================================
NET INCOME PER WEIGHTED AVERAGE COMMON
SHARE 0.02 -
=======================================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 3,978,202 4,085,633
=======================================
</TABLE>
Page 2
<PAGE>
INTERCORP EXCELLE INC.
Interim Consolidated Statements Of Cash Flows
For the three months ended April 30, 2000 and 1999
(Amounts expressed in US Dollars)
(Unaudited)
<TABLE>
<CAPTION>
April 30, 2000 April 30, 1999
$ $
<S> <C> <C>
Cash flows from operating activities:
Net Income 65,743 (3,809)
Adjustments to reconcile net income to net cash provided by operating
activities:
Amortization 130,815 92,043
Increase in accounts receivable (291,383) (250,290)
Increase in investments tax credits (8,529) (15,007)
Increase in inventory (154,095) (144,325)
Decrease/(increase) in prepaid expenses (63,442) 18,295
Increase in accounts payable and accrued liabilities 486,606 89,305
Changes in income tax payable/recoverable 9,393 (4,935)
---------------------------------
Total adjustments 109,365 (214,914)
---------------------------------
Net cash provided by operating activities 175,108 (218,723)
---------------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (161,493) (105,395)
---------------------------------
Cash flows from financing activities
Repayment of bank indebtedness - 239,301
Mortgage repayments (11,940) (13,702)
Proceeds from long term debt 431,090 -
Repayment of long term debt (54,182) (65,037)
Repurchase of common shares - (98,536)
---------------------------------
Net cash provided by(used in) financing activities 364,968 62,026
---------------------------------
Effect of foreign currency exchange rate changes (37,280) 98,307
---------------------------------
Net increase/(decrease) in cash and cash equivalents 341,303 (163,785)
Cash and cash equivalents
Beginning of period 1,749,012 3,170,147
---------------------------------
End of period 2,090,315 3,006,362
=================================
Income tax paid - -
=================================
Interest paid , net 38,436 10,076
=================================
</TABLE>
Page 3
<PAGE>
INTERCORP EXCELLE INC.
Interim Consolidated Statements of Stockholders' Equity
As at April 30, 2000
(Amounts expressed in US Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Additional Cumulative
Common Paid-in Treasury Translation Retained
Stock Capital Stock Adjustments Earnings Total
$ $ $ $ $ $
<S> <C> <C> <C> <C> <C> <C>
Balance as of January 31, 2000 3,344,522 505,496 (35,543) (269,757) 1,769,232 5,313,950
Foreign currency translation - - - (105,157) - (105,157)
Treasury Stock exchange adj - - 695 - - 695
Net income for the quarter - - - - 65,743 65,743
-------------------------------------------------------------------------------------------------
Balance as of April 30, 2000 3,344,522 505,496 (34,848) (374,914) 1,834,975 5,275,231
=================================================================================================
</TABLE>
Page 4
<PAGE>
INTERCORP EXCELLE INC.
Notes to Interim 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. All significant
transactions and balances among the consolidated entities have been eliminated
in the preparation of these consolidated financial statements.
b) Principal Activities
The Company is principally engaged in the production of food products in Canada
and its distribution in Canada and the U.S.
c) Cash and Cash Equivalents
Cash and cash equivalents 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 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 comparable maturity would be.
f) Inventory
Inventory is valued at the lower of cost or net realizable value. Cost
is determined on the first-in, first-out basis.
g) Property, Plant and Equipment
Property, plant and equipment are recorded at cost and are amortized
over their estimated useful lives at the undernoted rates and methods:
Building 4% declining balance
Equipment 20% declining balance
Leasehold Improvement 10% straight line
Vehicle 30% declining balance
Computer Equipment 30% declining balance
Office Furniture 20% declining balance
Computer Software 100% declining balance
Amortization for assets acquired during the period are recorded at one-half of
the indicated rates.
Page 5
<PAGE>
INTERCORP EXCELLE INC.
Notes to Consolidated Financial Statements (continued)
(Amounts expressed in US Dollars)
(Unaudited)
h) Income Taxes
The company uses the asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences
between the financial statement carry amounts of existing assets and liabilities
and their respective tax bases. This method also requires the recognition of
future tax benefits such as operating loss carryforwards, to the extent that
realization of such benefits is more likely than not. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those differences are expected to be recovered or
settled. The effect of deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
i) Intangible Asset
Intangible asset represents the cost of acquiring the Canadian trademark, brand
name and proprietary information of A-1(TM) Sauce business. It is being
amortized over a period of 30 years.
j) Foreign Currency Translation
The company maintains its books and records in Canadian dollars. Foreign
denominated monetary balances are translated into Canadian funds at the rate of
exchange prevailing at balance sheet date. Foreign currency denominated
non-monetary balances are translated at historical rates. Sales 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 year. No representation is
made that the Canadian dollar amounts could have been 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 stockholders' equity.
k) Sales
Sales represent the invoiced value of goods supplied to customers. Sales
are recognized upon delivery of goods and passage of title to customers.
l) 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
expenditures.
m) Use of Estimates
The preparation of financial statements requires 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 sales and expenses during
the reporting period. Actual results could differ from those estimates.
Page 6
<PAGE>
INTERCORP EXCELLE INC.
Notes to Consolidated Financial Statements (continued)
(Amounts expressed in US Dollars)
(Unaudited)
n) Accounting Changes
On February 1, 1996, the company adopted the provisions 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 asset 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 the use of a fair value-based method of accounting for
stock-based compensation. It encourages, but does not require, companies to
recognize compensation expense 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 Principles Board Option 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
statements for fiscal years beginning after December 15, 1995. The company has
adopted the disclosure provisions of SFAS No. 123.
In 1998, the Company adopted the provisions of SFAS No. 130 "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS 130 requires companies to disclose
comprehensive income in their financial statements. In addition to items
included in net income, comprehensive income includes items currently charged or
credited directly to stockholders' equity, such as the change in unrealized
appreciation (depreciation) of securities and foreign currency translation
adjustments. SFAS 131 established new standards for reporting operating
segments, products and services, geographic areas and major customers. Segments
are defined consistent with the basis management used internally to assess
performance and allocate resources.
On March 4, 1998, the AICPA Accounting Standards Executive Committee
issued Statement of Position No. 98-1 (SOP 98-1), "Accounting for the Cost of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 was issued
to address diversity in practice regarding whether and under what conditions the
costs of internal-use software should be capitalized. SOP 98-1 is effective for
financial statements for years beginning after December 15, 1998. In 1999, the
Company adopted the new requirements of the SOP which did not have significant
effect on net earnings during 1999.
In June 1998 SFAS No. 133, as amended, "Accounting for Derivative
Instruments and Hedging Activities" was issued, to be effective for fiscal
quarters and fiscal years beginning after June 15, 2000. The Company does not
have any derivative instruments or hedging activities therefore, the Company
believes that SFAS No. 133 will have no material impact on the Company's
financial statements or notes thereto.
Page 7
<PAGE>
INTERCORP EXCELLE INC.
Notes to Consolidated Financial Statements (continued)
(Amounts expressed in US Dollars)
(Unaudited)
o) Earnings per share
The Company's basic earnings per share calculations are based upon the
weighted average number of shares of common stock outstanding during each
period. The number of shares outstanding for the computation of fully diluted
earnings per share is calculated based upon the application of the treasury
stock method for outstanding options and warrants.
Fully diluted earnings per share was the same as basic net income per
common share for the period ended April 30, 2000.
2.) STOCKHOLDERS' EQUITY
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:
April 30, 2000 January 31, 2000
$ $
4,000,761 common shares 3,344,522 3,344,522
-------------------------------------------
b) Purchase Warrants
During the fiscal year 1998, 1,224,750 Purchase Warrants ("Warrants")
were issued pursuant to a Warrant Agreement between the company and Continental
Stock Transfer & Trust Company. Each Warrant entitles its holder to purchase,
during the four year period commencing on October 9, 1997, one share of common
stock at an exercise price of $6.00 per share, subject to adjustment in
accordance with the anti-dilution and other provision referred to below. The
Warrants may be redeemed by the company at any time and prior to their
expiration, at a redemption price of $0.10 per Warrant, on not less than 30
days' prior written notice to the holders of such Warrants, provided that the
closing bid price of the common stock if traded on the Nasdaq SmallCap Market,
or the last sale price per share of the common stock, if listed on the Nasdaq
National Market or on a national exchange, is at least 150% ($9.00 per share,
subject to adjustment) of the exercise price of the Warrants for a period of 20
consecutive business days ending on the third day prior to the date the notice
of redemption is given. Holders of Warrants shall have exercise rights until the
close of the business day preceding the date fixed for redemption.
The exercise price and the number of shares of common stock purchasable
upon the exercise of the Warrants are subject to adjustment upon the occurrence
of certain events, including stock dividends, stock splits, combinations or
classification of the common stock. The Warrants do not confer upon holders any
voting or any other rights of shareholders of the company.
No Warrant will be exercisable unless at the time of exercise the
company has filed with the Commission a current prospectus covering the issuance
of common stock issuable upon the exercise of the Warrant and the issuance of
shares has been registered or qualified or is deemed to be exempt from
registration or qualification under the securities laws of the state of
residence of the holder of the Warrant. The company has undertaken to use its
best efforts to maintain a current prospectus relating to the issuance of shares
of common stock upon the exercise of the Warrants until the expiration of the
Warrants, subject to the terms of the Warrant Agreement. While it is the
company's intention to maintain a current prospectus, there is no assurance that
it will be able to do so.
As at April 30, 2000, none of the Purchased Warrants has been exercised.
Page 8
<PAGE>
INTERCORP EXCELLE INC.
Notes to Consolidated Financial Statements (continued)
(Amounts expressed in US Dollars)
(Unaudited)
c) Bridge Warrants
In May, 1997, the company issued an aggregate of 175,000 Warrants (the
"Bridge Warrants"). The Bridge Warrants entitle the holder to purchase one share
of common stock for $3.75 per share for a period of four years. Bridge Warrants
are exchangeable at the option of the holder for a like number of warrants with
identical terms as the Warrants.
As at April 30, 2000, none of the Bridge Warrants has been exercised or
exchanged.
d) 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 is
administered by the compensation committee or the board of directors, who
determine those individuals who shall receive options, the time period during
which the options may be partially or fully exercised, the number of shares of
common stock issuable upon the exercise of the options and the option exercise
price.
The 1997 Plan is for a period for ten years, expiring in May, 2007.
Options may be granted to officers, directors, consultants, key employees,
advisors and similar parties who provide their skills and expertise to the
company. Options granted under the 1997 Plan might be exercisable for up to ten
years, may require vesting, and shall be at an exercise price as determined by
the board. Options are non-transferable except by the laws of descent and
distribution or a change in control of the company, as defined in the 1997 Plan,
and are exercisable only by the participant during his or her lifetime. Change
in control includes (I) the sale of substantially all of the assets of the
company and merger or consolidated with another, or (ii) a majority of the board
changes other than by the shareholders pursuant to board solicitation or by
vacancies filled by the board caused by death or resignation of such person. If
a participant ceases affiliation with the company by reason of death, permanent
disability or retirement at or after age 70, the option remains exercisable for
one year from such occurrence but not beyond the option's expiration date. Other
termination gives the participant three months to exercise, except for
termination for causes which results in immediate termination of the option.
Options granted under the 1997 Plan, at the discretion of the compensation
committee or the board, may be exercised either with cash, common stock having a
fair market equal to the cash excisable price, the participant's personal
recourse note, or with an assignment to the company of sufficient proceeds from
the sale of the common stock acquired upon exercise of the options with an
authorization to the broker or selling agent to pay that amount to the company,
or any combination of the above.
Any unexercised options that expire or terminate upon an employee's
ceasing to be employed by the company become available again for issuance under
the 1997 Plan. The 1997 Plan may be terminated or amended at any time by the
board of directors, except that the number of shares of common stock reserved
for issuance upon the exercise of options granted under the 1997 Plan may not be
increased without the consent of the shareholders of the company.
Page 9
<PAGE>
INTERCORP EXCELLE INC.
Notes to Consolidated Financial Statements (continued)
(Amounts expressed in US Dollars)
(Unaudited)
d) Stock Option Plan (continue)
In May 1999, the Board granted 10,000 options under the 1997 Plan to two of the
Company's independent Directors. 40% of the options are immediately exercisable,
an additional 30% become exercisable after March 2, 2000 and all the options are
exercisable after March 2, 2001. In April 1999, the Board granted 26,500 options
to employees and 20,000 options to five directors under the 1997 Plan. All
options are exercisable immediately.
On September 8, 1999, the Board of Directors has approved to change the exercise
price of existing outstanding stock options to $1.00.
Options outstanding as at April 30, 2000 are as follows:
Options granted to: Weighted Average
Options Exercise Price
$ $
Directors 187,500 1.00
Employees 47,500 1.00
Options granted to two independent directors 20,000 1.00
--------------------------------
Options oustanding at April 30, 2000 255,000 1.00
================================
No options are exercised or granted during the quarter ended April 30, 2000
f) Application of SFAS 123: Accounting for Stock-Based Compensation
As all options granted are exercisable at $1.00 per share which approximates the
fair value of the share, no Stock-based compensation has been recognized in
connection with these options.
3.) Treasury Stock
On March 1, 1999, the Board of Directors approved a Company stock
repurchase program to buy back up to 250,000 common shares of the Company at a
market price per share not exceeding $2.00. As at April 30, 2000 the Company had
repurchased 129,298 shares and of which 106,739 shares were cancelled in January
2000. As at April 30, 2000, the Company has on hand 22,559 common shares.
Page 10
<PAGE>
INTERCORP EXCELLE INC.
Notes to Consolidated Financial Statements (continued)
(Amounts expressed in US Dollars)
(Unaudited)
5.) COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standards No.
130 "Reporting Comprehensive Income and its components in the financial
statements. However, it does not affect net income or stockholders' equity. The
components of comprehensive income are as follows:
<TABLE>
<CAPTION>
April 2000 April 1999
$ $
<S> <C> <C>
Net income 65,743 (3,809)
Other comprehensive income / (loss) (135,775) 162,990
-----------------------------------------
Comprehensive income (70,332) 159,181
=========================================
Accumulated other comprehensive losses, January 31, 1999 (487,521)
Foreign currency translation adjustments for the quarter ended April 30, 1999 162,990
--------------------
Accumulated other comprehensive losses, April 30, 1999 (324,531)
Foreign currency translation adjustments for the quarter ended July 30, 1999 (135,693)
--------------------
Accumulated other comprehensive losses, June 30, 1999 (460,224)
Foreign currency translation adjustments for the quarter ended October 31, 1999 122,402
--------------------
Accumulated other comprehensive losses, October 31, 1999 (337,822)
Foreign currency translation adjustments for the quarter ended January 31, 2000 68,065
--------------------
Accumulated other comprehensive losses, January 31, 2000 (269,757)
Foreign currency translation adjustments for the quarter ended April 30, 2000 (105,157)
--------------------
Accumulated other comprehensive losses, April 30, 2000 (374,914)
====================
</TABLE>
Page 11
<PAGE>
Item 2.
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 and Section 21E of the Exchange Act, 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
Three months ended April 30, 2000 compared to the three months ended
April 30, 1999.
Sales for the three months ended April 30, 2000 were 4.2 million USD, a
30.1% increase over prior year first quarter sales of $3.2 million USD. This
large increase in sales reflected continued growth and distribution of Renee's
Gourmet(TM) branded dressings, sauces and marinades across Canada, as well as
Private Label and Food Service incremental new accounts (Mr. SUB, The KEG,
Serca, and private label Flemings in the USA). The first quarter of this fiscal
year was also impacted by incremental sales of A1(TM) steak sauces, which were
not included in gross Sales until the third quarter of the last fiscal year.
Gross profit for the same three month period of $1.3 million was 32.8%
of net sales, which was only slightly higher than the same period one year ago
(33.3% of net sales). This was attributed to a higher mix of lower margin Food
Service business and higher than anticipated distribution expenses primarily to
Western Canada accounts.
Selling and marketing expenses of $575,958 were 30% higher than the
first three months of 1999, reflecting additional consumer marketing and sales
support expenditures behind Renee's Gourment(TM) dressings, sauces and marinades
as well as Food Service business. General and Administrative expenses of
$390,940 were 20% higher than prior year first quarter, primarily to support
sales growth and wage increases. R&D expenditures of $95,946 also reflect
increased product research and development work, necessary to support the
company's continued aggressive growth over the last 5 fiscal quarters.
Financial costs have been only partially offset by interest income on
funds invested in USD interest bearing term accounts.
Operating income decreased slightly over prior year to $65,823 for the
three months ended April 30, 2000. This reflected higher than anticipated
distribution expenditures, combined with a high investment in marketing and
selling expenses during the quarter.
The company also reported a net translation gain of $20,388 on US
funds converted to Canadian dollars for the first three months of the current
fiscal year. This reflects some strengthening of the US dollar versus the
Canadian dollar since the beginning of current fiscal year. (Although the
company's functional currency is Canadian dollars, the majority of available
cash funds are held in US dollars).
Net income was $65,743 or $0.02 per share, versus a breakeven result
for the first quarter of last year, which reflected incremental margins.
Page 12
<PAGE>
Liquidity and Capital Resources
The company had net cash from operations of $175,108 for the three
months ending April 30, 2000. The principal source of cash traced to an increase
in accounts payable and accrued liabilities. This was partially offset by cash
required to carry higher inventories and an increase in accounts receivable at
the end of the period.
Capital spending during the first three months of 2000 reflected
planned capital additions of $161,493. Capital additions in the current fiscal
year to date are higher than prior year.
The Company's secured credit arrangement with National Bank of Canada
includes a credit line of Cdn$3.0 million that is due on demand and bears
interest at prime plus 1.0% - which is not currently being used due to the
company's positive cash position in US dollars. All borrowings are
collateralized by the assets of the Company.
The Company received net proceeds of an 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 continue to
aggressively seek synergistic acquisitions. The Company currently 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.
Page 13
<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 Securities and
Exchange 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:
Expense Amount
------- ------
Underwriter's Discounts and Commissions $512,247
Expenses paid to or for the Underwriters 241,674
Other expenses (1) 569,492
------------
Total Expenses $1,323,413
============
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:
Item Amount
Purchase of Building $396,534
Temporary Investments (2) 1,500,876
Purchase of A1 Sauce business 1,246,652
Repayment of Indebtedness 655,000
------------
Total Application of Net Proceeds $3,799,062
============
(2) Money market investments
Temporary investments represent term deposits with the Company's bank
for maturity terms less than 3 months.
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.
Page 14
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit description
27. Financial Data Schedule
Page 15
<PAGE>
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.
INTERCORP EXCELLE, INC.
June 14, 2000 By: /s/ ARNOLD UNGER
----------------
ARNOLD UNGER
Chief Executive Officer and
Co-Chairperson
June 14, 2000 By: /s/ RENEE UNGER
---------------
RENEE UNGER
President and Co-Chairperson
June 14, 2000 By: /s/ FRED BURKE
--------------
FRED BURKE
Chief Financial Officer, Chief
Operating Officer and Secretary
Page 16
