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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(X) QUARTERY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From ______ to ______
Commission File Number 000-24007
BALANCE BAR COMPANY
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(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 77-0306617
- ------------------------------- ---------------------
(State of Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1015 Mark Avenue
Carpinteria, California 93013
- --------------------------------------- ----------------------
(Address of Principal Executive Office) (Zip Code)
</TABLE>
(805) 566-0234
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(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether 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 proceeding 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 ( ) No (X)
At August 10, 1998, the registrant had 11,305,763 shares of its common stock
outstanding.
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Balance Bar Company
Index To Form 10-Q
Quarter Ended June 30, 1998
<TABLE>
<CAPTION>
Index Page
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<S> <C>
PART I. -- FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets 3
Income Statements 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. -- OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities and Use of Proceeds 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
</TABLE>
2
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Balance Bar Company
Balance Sheets
(amounts in 000's, except par value)
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
-------------- ------------------
(unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,448 $ 89
Marketable securities 3,901 ---
Accounts receivable, net 7,550 3,444
Income taxes receivable 269 374
Inventories 6,549 3,806
Prepaid and other 2,175 1,381
Deferred taxes 404 344
------- -------
Total current assets 22,296 9,438
------- -------
Property and equipment, net 1,227 1,011
Other assets 32 347
------- -------
Total assets $23,555 $10,796
======= =======
Current liabilities:
Current portion of long-term debt $ 3 $ 85
Short-term borrowings --- 1,100
Accounts payable 4,981 4,201
Accrued liabilities 1,922 1,078
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Total current liabilities 6,906 6,464
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Long-term debt, net 8 228
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Stockholders' equity:
Common stock, $0.01 par value
Authorized -- 24,000 shares
Issued and outstanding- 11,115 in 1998 and
9,345 in 1997 111 93
Additional paid-in capital 12,457 2,424
Retained earnings 4,073 1,587
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Total stockholders' equity 16,641 4,104
------- -------
Total liabilities and equity $23,555 $10,796
======= =======
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
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Balance Bar Company
Income Statements
(amounts in 000's, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $20,556 $11,095 $38,013 $17,231
Cost of sales 10,491 5,499 19,505 8,469
------- ------- ------- -------
Gross profit 10,065 5,596 18,508 8,762
------- ------- ------- -------
Expenses:
Advertising 2,564 1,627 4,194 2,476
Selling and marketing 4,067 1,906 7,589 3,036
General and administrative 1,358 554 2,415 971
Interest (income) expense 40 (9) 98 (14)
------- ------- ------- -------
Total expenses 8,029 4,078 14,296 6,469
------- ------- ------- -------
Income before income taxes 2,036 1,518 4,212 2,293
Income taxes 834 641 1,726 969
------- ------- ------- -------
Net income $ 1,202 $ 877 $ 2,486 $ 1,324
======= ======= ======= =======
Earnings per share:
Basic $ 0.12 $ 0.09 $ 0.25 $ 0.14
======= ======= ======= =======
Diluted $ 0.10 $ 0.08 $ 0.21 $ 0.12
======= ======= ======= =======
Weighted shares outstanding:
Basic 10,287 9,294 9,945 9,281
======= ======= ======= =======
Diluted 12,210 11,660 11,948 11,547
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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Balance Bar Company
Statements of Cash Flows
(amounts in 000's)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,486 $ 1,324
Adjustments to reconcile net income to net cash
provided by (used in) operating activities
Depreciation and amortization 304 42
Compensation expense in connection
with common stock and stock options 114 150
Changes in operating assets and liabilities:
Accounts receivable (4,106) (1,520)
Income taxes receivable 386 ---
Inventories (2,743) (639)
Prepaid and other (810) (539)
Deferred taxes (60) 1
Accounts payable 780 1,147
Accrued expenses 765 583
Income taxes payable --- 109
------- -------
Net cash provided by (used in) operating activities (2,884) 658
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (520) (249)
Purchases of investments (3,885) ---
------- -------
Net cash flows used in investing activities (4,405) (249)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering 9,798 ---
Initial public offering costs, net of reimbursement 115 ---
Reduction in short term and other borrowings (1,402) ---
Proceeds from exercise of stock options 137 13
------- -------
Net cash flows provided by financing activities 8,648 13
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS 1,359 422
CASH AND CASH EQUIVALENTS, beginning of period 89 1,119
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 1,448 $ 1,541
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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Balance Bar Company
Notes to Financial Statements
June 30, 1998
Note 1. Accounting Policies
Basis of Presentation
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and note disclosures required by generally
accepted accounting principles for complete financial statements. All
adjustments (which include only normal recurring adjustments) considered
necessary for a fair presentation have been included. These unaudited financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Registration Statement on Form S-1 dated June
1, 1998. The results of operations for these interim periods are not
necessarily indicative of the operating results for a full year.
Marketable Securities
Marketable securities consist of commercial paper with maturities extending
through January 1999. The company classifies marketable securities as available
for sale and records them at fair value. Unrealized holding gains and losses,
which were not significant at June 30, 1998, net of the related tax effect are
excluded from earnings and reported as a separate component of stockholders'
equity. Realized gains and losses on disposition are determined on the specific
identification basis. Dividend and interest income is recognized when earned.
A decline in the value of available for sale securities below cost, that is
deemed to be other than temporary, results in a reduction in carrying amount to
fair value. The impairment is charged to earnings and a new cost basis is
established.
Inventories
Inventories consist of the following at June 30, 1998 and December 31, 1997 (in
000's):
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
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<S> <C> <C>
Balance bars $4,685 $2,074
Powdered drink mix 823 473
Packaging material and other 1,041 1,259
------ ------
$6,549 $3,806
====== ======
</TABLE>
Earnings Per Share
Earnings per share are based on the weighted average number of shares
outstanding for the period plus the dilutive effect of stock options. The
weighted average number of shares outstanding for the three months ended June
30, 1998 and 1997 was 10,287,000 and 9,294,000, respectively, and for the six
months ended June 30, 1998 and 1997 was 9,945,000 and 9,281,000, respectively.
The dilutive effect of stock options for the three months ended June 30, 1998
and 1997 was 1,923,000 and 2,366,000, respectively, and for the six months ended
June 30, 1998 and 1997 was 2,003,000 and 2,266,000, respectively.
New Authoritative Pronouncement
The Financial Accounting Standards Board recently issued SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits." This
new accounting standard will not have any effect on the Company's financial
reporting.
6
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Note 2. Commitments and Contingencies
Certain advertising claims made by the Company have been challenged by two of
the Company's competitors. The Company has agreed not to make certain
advertising claims in the future. In April 1998, one competitor sued the
Company seeking damages as a result of allegedly false and misleading
advertising. The competitor also alleged that the Company, with one of the
Company's sales executives who previously worked for the competitor,
misappropriated trade secrets. The Company has general (including advertising
injury), director and officer, and excess liability insurance. The Company was
notified by one of its insurers that the insurer accepted the Company's director
and officer liability claim, but the Company has not yet received confirmation
from any of its insurers regarding their defense or acceptance of the Company's
other insurance claims. The Company intends to vigorously defend this lawsuit.
However, no assurance can be given that this lawsuit will not be determined
adversely to the Company. No provision has been made in the accompanying
financial statements for any future litigation costs or loss that might result
from this lawsuit, if any, because the outcome is uncertain and no estimate can
be made at this time.
Note 3. Initial Public Offering
In June 1998, the Company completed an initial public offering of common stock.
The Company sold 1,003,372 shares of common stock and realized net proceeds of
$9,519,000, net of $279,000 in costs and expenses.
Note 4. Stockholders' Equity
In April 1998, the Company's stockholders ratified a six-for-one stock split of
the Company's common and preferred stock. The Company's financial statements
have been retroactively adjusted, for all periods presented, to reflect the
effect of the stock split. The Company's stockholders also ratified an increase
of 309,000 in the number of stock options the Company is authorized to issue
under an existing stock option plan and ratified the adoption of a new stock
option plan, under which the Company is authorized to issue 1,800,000 shares of
common stock upon the exercise of stock options.
The Company had 3,806,910 shares of convertible preferred stock, $0.01 par
value, outstanding prior to the initial public offering of common stock. In
connection with the completion of the initial public offering, all of the
convertible preferred stock was converted to common stock. The Company's
financial statements have been retroactively adjusted, for all periods
presented, to reflect the effect of the conversion of the preferred stock into
common stock. No preferred stock is currently authorized or outstanding.
During the six months ended June 30, 1998, 767,005 shares of common stock were
issued in connection with the exercise of stock options. Additional paid-in
capital also increased by $281,000 reflecting the tax benefit realized on the
exercise of certain stock options.
Note 5. Significant Customers
During the six months ended June 30, 1998, the Company had sales to three
customers that represented approximately 17%, 16% and 11%, respectively, of
sales. During the six months ended June 30, 1997, the Company had sales to three
customers that represented approximately 28%, 17% and 11%, respectively, of
sales.
7
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Company has made and will continue to make forward-looking statements.
Certain forward-looking statements are contained in "Management's Discussion and
Analysis of Financial Condition and Results of Operations", including the
expected adequacy of available funds to meet foreseeable needs, and other
sections of this report. Except for the historical information contained
herein, the following discussion and analysis contains certain forward-looking
statements that involve risks and uncertainties, such as statements of the
Company's plans, objectives, expectations and intentions. These statements can
be identified by the use of forward-looking terminology such as "believes,"
"expects," "intends," "plans," "may," "will," "should," or "anticipation" or the
negative thereof or other variations thereon or comparable terminology. These
risks include maintaining acceptance in new distribution channels, volatility in
sales and earnings, anticipating changes in dietary trends, no adverse
publicity, successful development and sale of new products, maintaining sales to
significant customers and other risk factors. The Company's actual results
could differ materially from those discussed here. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors" in the
Company's prospectus dated June 1, 1998, as well as those discussed elsewhere
herein.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain income
statement data expressed as a percentage of sales:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 51.0 49.6 51.3 49.1
----- ----- ----- ----
Gross profit 49.0 50.4 48.7 50.9
----- ----- ----- ----
Expenses:
Advertising 12.5 14.6 11.0 14.4
Selling and marketing 19.8 17.2 20.0 17.6
General and administrative 6.7 4.9 6.3 5.6
Interest (income) expense .1 --- .3 ---
----- ----- ----- ----
Total expenses 39.1 36.7 37.6 37.6
----- ----- ----- ----
Income before income taxes 9.9 13.7 11.1 13.3
Income taxes 4.1 5.8 4.6 5.6
----- ----- ----- ----
Net income 5.8% 7.9% 6.5% 7.7%
===== ===== ===== ====
</TABLE>
Sales increased 85% to $20.6 million in the three months ended June 30, 1998
from $11.1 million in the same period of 1997. Sales increased 121% to $38.0
million in the six months ended June 30, 1998 from $17.2 million in the same
period of 1997. The increase was primarily attributable to increased sales at
mass merchandise, club and grocery stores. Sales also increased at natural
foods stores. Several significant customers ran special sales promotions in the
three and six months ended June 30, 1998 and approximately $1.7 million and $4.5
million, respectively, of the increase was due to increased sales to those
customers. Unusually high sales to two natural foods customers near the end of
the three months ended June 30, 1997 also favorably impacted sales for that
quarter. The addition of three new Balance bar flavors in December 1997
favorably impacted sales in the three and six months ended June 30, 1998, and
the introduction of a powdered drink mix in April 1997 also favorably impacted
sales during the six months ended June 30, 1998.
8
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Sales to customers in the natural foods channel were 52% of sales in the three
months ended June 30, 1998, compared to 59% in the three months ended March 31,
1998 and 69% for the year ended December 31, 1997. Sales to the Company's six
largest 1998 customers were 66% of sales in the three months ended June 30,
1998, compared to 70% in the three months ended March 31, 1998 and 66% for the
year ended December 31, 1997. Sales to Trader Joe's, Costco and United Natural
Foods exceeded 10% of sales for the six months ended June 30, 1998 at 17%, 16%
and 11%, respectively, of sales. Sales to customers in the United States were
99% of sales for the three months ended June 30, and March 31, 1998 and 97% for
the year ended December 31, 1997. Sales of the Balance bar product line were
97% of sales in the three months ended June 30, 1998, compared to 90% in the
three months ended March 31, 1998 and 92% for the year ended December 31, 1997.
Gross profit dollars increased to $10.1 million in the three months ended June
30, 1998 from $5.6 million in the same period of 1997. Gross profit dollars
increased to $18.5 million in the six months ended June 30, 1998 from $8.8
million in the same period of 1997. The gross profit margin declined to 49.0%
in the three months ended June 30, 1998 from 50.4% in the same period of 1997.
The gross profit margin declined to 48.7% in the six months ended June 30, 1998
from 50.9% in the same period of 1997. The decline in gross profit margin was
due to a change in product and channel mix and additional packaging costs.
Advertising expenses increased to $2.6 million in the three months ended June
30, 1998 from $1.6 million in the same period of 1997. Advertising expenses
increased to $4.2 million in the six months ended June 30, 1998 from $2.5
million in the same period of 1997. The increase was due to the Company's
strategic decision to build brand awareness and increase sales through
substantial increases in radio and print advertising and the addition of
television advertising. The Company expects to continue to increase advertising
expenses in the third and fourth quarter of 1998 compared to the same periods in
1997.
Selling and marketing expenses increased to $4.1 million in the three months
ended June 30, 1998 from $1.9 million in the same period of 1997. Selling and
marketing expenses increased to $7.6 million in the six months ended June 30,
1998 from $3.0 million in the same period of 1997. The increase was due to
higher personnel-related costs as the Company built its sales and marketing
organization and higher broker commission expense related to the increase in
sales. The increase was also due to increases in special events and product
sampling to build customer awareness of the Company's products. Selling and
marketing expenses as a percentage of sales increased to 19.8% of sales in the
three months ended June 30, 1998 from 17.2% in the same period of 1997,and to
20.0% of sales in the six months ended June 30, 1998 from 17.6% in the same
period of 1997.
General and administrative expenses increased to $1.4 million in the three
months ended June 30, 1998 from $554,000 in the same period of 1997. General
and administrative expenses increased to $2.4 million in the six months ended
June 30, 1998 from $971,000 in the same period of 1997. The increase was due to
higher payroll and facility rentals to support the Company's increased sales.
In addition, higher legal and insurance expenses were incurred in the three
months ended June 30, 1998. General and administrative expenses as a percentage
of sales increased to 6.7% of sales in the three months ended June 30, 1998 from
4.9% in the same period of 1997, and to 6.3% of sales in the six months ended
June 30, 1998 from 5.6% in the same period of 1997.
Interest (income) expense increased to $40,000 of interest expense in the three
months ended June 30, 1998 from $9,000 of interest income in the same period of
1997. Interest (income) expense increased to $98,000 of interest expense in the
six months ended June 30, 1998 from $14,000 of interest income in the same
period of 1997. The interest expense in 1998 was due to borrowings under the
Company's line of credit and term loan agreements.
The effective tax rate in the three and six months ended June 30, 1998 was 41.0%
and the effective tax rate in the three and six months ended June 30, 1997 was
42.2%. The decline in the effective tax rate was due to lower non-deductible
expenses projected for 1998.
9
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LIQUIDITY AND CAPITAL RESOURCES
The primary source of cash flows for all periods has been from Balance bar
product line sales. For the year ended December 31, 1997 and the six months
ended June 30, 1998, cash generated from operations was not sufficient to fund
increases in accounts receivable and inventory, prepaid advertising expenses and
purchase property and equipment. The Company entered into credit agreements
that were used to finance the shortfall. For the six months ended June 30,
1997, cash generated from operations was sufficient to fund increases in
accounts receivable and inventory, prepaid advertising expenses and purchase
property and equipment. In June 1998, the Company sold 1,003,372 shares of
common stock and raised $9,519,000 net of $279,000 of offering costs and the
proceeds were used, in part, to repay outstanding short and long-term debt.
The increase in accounts receivable, inventory and prepaid advertising expenses
of $7.2 million in the six months ended June 30, 1998 was offset by increased
accounts payable of $780,000. The increase in accounts receivable, inventory
and prepaid advertising expenses of $2.6 million in the six months ended June
30, 1997 was offset by increased accounts payable of $1.1 million. Cash flow
provided by (used in) operating activities was $(2.9) million and $658,000 in
the six months ended June 30, 1998 and 1997, respectively.
Cash used in investing activities was for the purchase of property and equipment
and marketable securities. Purchases of property and equipment in the six
months ended June 30, 1998 and 1997 were $520,000 and $249,000, respectively.
The higher level of expenditures in 1998 reflects the Company's 1997 facility
and personnel expansion to support higher sales volume. The 1998 capital
investments were for computer hardware and software, office furniture and
equipment, leasehold improvements and packaging design plates and drums. The
Company expects to make a similar level of capital investments in the second
half of 1998 as was made in the first half of 1998. A portion of the initial
public offering proceeds was used to purchase $3.9 million of marketable
securities. Cash used in investing activities was $4.4 million and $249,000 in
the six months ended June 30, 1998 and 1997, respectively.
Cash provided by financing activities was from the net proceeds of the initial
public offering and short term borrowings, net of repayments and the proceeds
from the exercise of stock options. In June 1998, the Company sold 1,003,372
shares of common stock and realized proceeds of $9.8 million. In connection
with the initial public offering of common stock, the Company incurred offering
costs of $279,000 and the selling shareholders reimbursed the Company for
offering costs paid in the fourth quarter of 1997. In the six months ended June
30, 1998, the Company borrowed $2.4 million under a revolving line of credit,
and $3.8 million of the proceeds from the initial public offering were used to
repay short and long-term debt. During the six months ended June 30, 1998,
767,005 shares of common stock were issued in connection with the exercise of
stock options. Cash provided by financing activities was $8.6 million and
$13,000 in the six months ended June 30, 1998 and 1997, respectively.
As of June 30, 1998, the Company had a $9 million revolving line of credit of
which $6.9 million was available (based upon 75 percent of the Company's
eligible accounts receivable), none of which was outstanding. The line of credit
is secured by all of the Company's assets. The line of credit bears interest at
the bank's prime rate (8.5 percent at June 30,1998) plus 3/4%, and expires in
April 2000.
To date, the Company has not had significant discussions about the acquisition
of companies. In the future, the Company may consider making an investment in
or acquiring companies or product lines that complement the Company's existing
product lines. The Company is not able to predict when a prospective
acquisition candidate might become available, the terms of the financing, or
when any transaction might be closed or the effect of any acquisition on the
Company's business, results of operations or financial condition.
The Company expects to use the net proceeds from the initial public offering,
over the next two to three quarters, to fund increases in accounts receivable,
inventory, prepaid advertising expenses and purchase property and equipment.
When the net proceeds are expended, the Company expects to fund increases in
10
<PAGE>
accounts receivable, inventory, prepaid advertising expenses and purchase
property and equipment from borrowings under the revolving line of credit. The
Company believes that it has adequate capital resources and liquidity to meet
anticipated cash needs for working capital and capital expenditures for at least
the next 12 months.
RECENT ACCOUNTING PRONOUNCEMENT
The Financial Accounting Standards Board recently issued SFAS No. 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits." This
new accounting standard will not have any effect on the Company's financial
reporting.
SEASONALITY OF SALES
The Company has not observed seasonality in sales in 1997 and 1998 due to the
significant expansion of distribution and resulting sales increases for the
periods. The Company believes that there may be some seasonally reduced sales
in the fourth quarter due to retailers' emphasis on holiday merchandise in that
quarter.
YEAR 2000 COMPLIANCE
The Company is currently implementing a new sales, inventory and accounting
system that the vendor has represented to be Year 2000 compliant. The Company
does not anticipate any significant expenses with Year 2000 compliance problems.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On April 8, 1998, the day the Company filed the initial registration statement
relating to its initial public offering, PowerBar, Inc. ("PowerBar") filed a
complaint against the Company and its Senior Vice President of Sales in U.S.
District Court for the Northern District of California. The complaint alleges
in general that the Company engaged in false advertising, unfair competition,
and, with its Senior Vice President of Sales who previously worked for PowerBar,
misappropriated trade secrets. PowerBar also alleges that the sales executive
tortuously interfered with PowerBar's business relationships by inducing
distributors, brokers, athletes, and sponsors to terminate their business
relationships with PowerBar. The factual allegations against the Company's
advertising are similar to those already reviewed by the National Advertising
Division of the Better Business Bureaus, Inc. at PowerBar's request.
PowerBar seeks, among other things, injunctive relief prohibiting the allegedly
false advertising, corrective advertising in various print media, compensatory
damages in an unspecified amount, disgorgement of the Company's profits, treble
and punitive damages as to certain claims, attorneys' fees, and restitution of
revenues obtained from the sale of Balance bars. The Company intends to
vigorously contest PowerBar's claims. On April 30, 1998, the Company and the
sales executive answered the allegations in PowerBar's complaint. In addition,
upon the Company's motion, the court dismissed PowerBar's claim for relief under
California's common law of unfair competition, on the ground that PowerBar had
failed as a matter of law to make out such a claim. However, the Company cannot
predict the ultimate outcome of this litigation, and no assurance can be given
that this lawsuit will not be determined adversely to the Company. An outcome
adverse to the Company, costs associated with defending the lawsuit, payment of
damages and costs associated with the indemnification of its sales executive,
the significant diversion of management's time and resources to defend the
lawsuit, a substantial settlement or award of damages, to the extent in excess
of any insurance coverage, or negative publicity resulting from the lawsuit
could have a material adverse effect on the Company's business, results of
operations, and financial condition.
11
<PAGE>
Item 2. Changes in Securities and Use of Proceeds
Use of Proceeds From Registered Securities
In the Company's initial public offering, the Company sold 1,003,372 shares of
common stock and selling stockholders sold 1,396,628 shares of common stock on
June 5, 1998. Upon the underwriters' exercise of the over-allotment option,
selling stockholders sold 360,000 shares of common stock on June 15, 1998. The
effective date of the registration statement on Form S-1 for the 2,760,000
shares of common stock registered by the registration statement was June 1, 1998
and the file number was 333-49651. The co-managing underwriters of the offering
were Hambrecht & Quist LLC and Adams, Harkness & Hill, Inc.
The price to the public of the 2,760,000 shares of common stock sold was $10.50
per share and the gross proceeds were $28,980,000. The total underwriting
discount was $2,028,600. The net proceeds to the Company and the selling
shareholders was $9,797,928 and $17,153,472, respectively. The total costs and
expenses incurred in the offering, including an estimate for accrued but unpaid
amounts, was $768,000. As discussed in "Certain Transactions" in the
registration statement on Form S-1, the Company paid $56,717 to Adelle Demko, a
director of the Company, in connection with special consulting services related
to the offering.
The net offering proceeds to the Company, after deducting costs and expenses,
were $9,519,000. The net proceeds were used to pay down $3.8 million of short
and long-term debt and the balance was retained for working capital and other
general corporate purposes.
Item 4. Submission of Matters to a Vote of Security Holders
A special meeting of stockholders was held on April 24, 1998. The Company's
stockholders (1) ratified the amended and restated Certificate of Incorporation,
which included a six-for-one common and preferred stock split, (2) approved an
increase of 309,000 in the number of stock options the Company is authorized to
issue under the 1997 Stock Incentive Plan, (3) approved the adoption of the 1998
Performance Award Plan under which the Company is authorized to issue 1,800,000
shares of common stock upon the exercise of stock options, and (4) ratified two
amendments to the Company's Bylaws. A total of 6,452,322 votes were cast at the
meeting in favor of each proposal. No votes were cast against any proposal.
A regular meeting of stockholders was held on May 21, 1998. Stockholders
approved the election of eight directors in three classes. A total of 7,133,154
votes were cast at the meeting in favor of the eight directors. The two Class I
directors, elected to serve until 1999, are Barry D. Goss and Dennis Ryan
McCarthy. The three Class II directors, elected to serve until 2000, are John
Hale, George F. Raymond and James A. Wolfe. The three Class III directors,
elected to serve until 2001, are Thomas R. Davidson, Adelle M. Demko and Richard
G. Lamb. No votes were cast against any of the eight directors and no votes
were cast for any other person.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule -- June 30, 1998
(b) There were no reports on Form 8-K for the three months ended June 30,
1998.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Balance Bar Company
-------------------
(Registrant)
Date: August 10, 1998 By /s/ Thomas J. Flahie
-----------------------------------------
Thomas J. Flahie
Senior Vice President of Finance and
Administration (Principal Financial and
Accounting Officer)
13
<PAGE>
Exhibit Index
Exhibit No. Description
27.1 Financial Data Schedule
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,448
<SECURITIES> 3,901
<RECEIVABLES> 7,570
<ALLOWANCES> 20
<INVENTORY> 6,549
<CURRENT-ASSETS> 22,296
<PP&E> 1,754
<DEPRECIATION> 527
<TOTAL-ASSETS> 23,555
<CURRENT-LIABILITIES> 6,906
<BONDS> 11
0
0
<COMMON> 111
<OTHER-SE> 16,530
<TOTAL-LIABILITY-AND-EQUITY> 23,555
<SALES> 20,556
<TOTAL-REVENUES> 20,581
<CGS> 10,491
<TOTAL-COSTS> 10,491
<OTHER-EXPENSES> 7,989
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65
<INCOME-PRETAX> 2,036
<INCOME-TAX> 834
<INCOME-CONTINUING> 1,202
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,202
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.10
</TABLE>
