SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
(MARK ONE)
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
/ / REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _______________ to _______________
Commission file number 000-24941
DELICIOUS BRANDS, INC.
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(Exact name of the registrant as specified in its charter)
DELAWARE 06-1255882
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2070 MAPLE STREET, DES PLAINES, ILLINOIS 60018
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(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code: (847) 699-3200
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Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
YES /X/ NO / /
As of April 29, 1999, the aggregate market value of the Registrant's Common
Stock held by non-affiliates of the Registrant was $38,861,681. Solely for the
purposes of this calculation, shares held by directors and officers of the
Registrant have been excluded. Such exclusion should not be deemed a
determination or an admission by the Registrant that such individuals are in
fact, affiliates of the Registrant.
As of April 29, 1999, there were 4,441,335 shares outstanding of the
Registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE: None.
<PAGE>
EXPLANATORY NOTE
This Amendment No. 1 on Form 10-K/A (this "Amendment") is being filed
in order to amend the Registrant's Annual Report on Form 10-K filed with the
Securities and Exchange Commission on April 15, 1999 to include the information
required to be disclosed in Part III thereof.
<PAGE>
Part III of this Annual Report is hereby amended in its entirety to add
the following information:
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the members of the Company's Board of Directors and
the Company's executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
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<S> <C> <C>
Donald C. Schmitt....................... 67 Chairman of the Board of Directors
Michael J. Kirby........................ 49 Chief Executive Officer, President and Director
Jeffry W. Weiner........................ 48 Executive Vice President, Chief Financial Officer,
Treasurer and Secretary
Edward R. Sousa......................... 41 Director
John H. Wyant........................... 52 Director
Michael P. Schall....................... 45 Director
Russell D. Glass........................ 36 Director
George W. Hebard, III................... 26 Director
</TABLE>
DONALD C. SCHMITT has been a director of the Company since 1989 and
Chairman of the Board since August 1997. Since 1977, Mr. Schmitt has been the
chairman of the board, president, chief executive officer and a principal
stockholder of The Shur-Good Biscuit Co., Inc. ("Shur-Good"), distributor of
cookies, crackers and salty snack foods. Shur-Good is a distributor of the
Company. See "Certain Relationships and Related Transactions." Mr. Schmitt is
also vice chairman of the board of Miller Buckeye Biscuit Co., a director of
Core Resources Inc., both of which are privately-owned, and the former president
of the Biscuit and Crackers Distributor Association. He won the Xavier
University Executive Achievement Award in 1993. Mr. Schmitt was also awarded a
Papal appointment to the Equestrian Order of Holy Sepulchre by the Catholic
Church in 1995. Mr. Schmitt holds a B.A. in accounting from Xavier University.
MICHAEL J. KIRBY has been the Company's Chief Executive Officer and
President and a director since August 1997. From February 1997 to August 1997,
Mr. Kirby was a private consultant. From February 1994 until January 1997, Mr.
Kirby was president of Concorde Brands, a division of Nestle USA. From November
1992 until February 1994, Mr. Kirby was president and chief executive officer of
National Oats, Inc. From 1989 until November 1992, Mr. Kirby was president and
chief operating officer of Willow Foods. From 1984 until 1989, Mr. Kirby was
president and chief executive officer of Royal American Foods, Inc. until its
sale to Pepperidge Farm, Inc. during Mr. Kirby's tenure. Mr. Kirby has also held
senior marketing positions at the Kellogg Company, Win Schuler Foods, Inc. and
H.P. Hood. Mr. Kirby holds a B.S. in business from The State University of New
York-Albany (formerly Regent's College of New York-Albany).
JEFFRY W. WEINER has been the Company's Executive Vice President since
January 1999, the Treasurer and Secretary since October 1997 and the Chief
Financial Officer since March 1996. From March 1996 to December 1998, Mr. Weiner
was the Company's Vice President. Mr. Weiner was a consultant in the consumer
electronics industry from 1994 until March 1996. From 1977 to 1994, Mr. Weiner
was employed in several positions, most recently as senior vice president of
finance and administration, by Cobra Electronics Corporation, a publicly held
marketer of radar detectors, cordless telephones and answering machines to
retail stores. Mr. Weiner holds a B.S. in accounting from the University of
Illinois, and is a Certified Public Accountant.
<PAGE>
EDWARD R. SOUSA has been a director of the Company since February 1998.
Mr. Sousa has been a practicing attorney in New York for more than five years.
Mr. Sousa holds a B.A. from Brandeis University and a J.D. from the University
of Pennsylvania.
JOHN H. WYANT has been a director of the Company since December 1997.
Mr. Wyant was a co-founder and has been the managing partner of Blue Chip
Venture Company, a venture capital firm with approximately $180 million under
management that concentrates on financing companies primarily based in the
mid-western United States, since its inception in 1990. Mr. Wyant also serves as
a director of various private companies and three publicly-traded companies,
Regent Communications, Inc., USInternetworking, Inc. and Zaring National
Corporation, of which he is vice chairman of the board of directors. Mr. Wyant
was a director of the Company from 1990 to 1996. Mr. Wyant holds a B.A. in
political science from Denison University and a J.D. from Salmon P. Chase
College of Law.
MICHAEL P. SCHALL has been a director of the Company since February
1999. Since July 1995, Mr. Schall has been the president of Guiltless Gourmet,
Inc. ("Guiltless"), a manufacturer and marketer of all-natural snack foods. From
July 1994 to July 1995, Mr. Schall was the senior vice president of Guiltless.
From 1987 to 1994, Mr. Schall was president of Strategic Marketing Methods, a
marketing consulting firm to the retail and packaged goods industry. From 1985
to 1987, Mr. Schall was vice president of marketing and sales for the grocery
products division of Prepared Products Company. From 1980 to 1985, Mr. Schall
served in various capacities in brand management for Lawry's Foods, Inc. Mr.
Schall holds a B.S. in marketing from California State University-Los Angeles
and an M.B.A. from the University of Southern California Graduate School of
Business.
RUSSELL D. GLASS has been a director of the Company since April 1999
and was so elected pursuant to the terms of the Securities Purchase Agreement by
and between the Company and Little Meadow Corp., a company whose sole
stockholder is Carl C. Icahn (the "Little Meadow Agreement"). Since April 1998,
Mr. Glass has been president and chief investment officer of Icahn Associates
Corp., a diversified investment firm. Since August 1998, Mr. Glass has also
served as vice chairman and director of Lowestfare.com, Inc., an internet travel
reservations company. Previously, Mr. Glass had been a partner in Relational
Investors LLC, from 1996 to 1998, and in Premier Partners Inc., from 1988 to
1996, firms engaged in investment research and management. From 1984 to 1986,
Mr. Glass served as an investment banker with Kidder, Peabody & Co. Mr. Glass
serves as a director of Automated Travel Systems, Inc., a software development
firm; Cadus Pharmaceutical Corp., a biotechnology company; National Energy
Group, Inc., an oil & gas exploration and production company; and the A.G.
Spanos Corporation, a national real estate developer and owner of the NFL San
Diego Chargers Football Club. Mr. Glass holds a B.A. in economics from Princeton
University and an M.B.A. from the Stanford University Graduate School of
Business.
GEORGE W. HEBARD, III has been a director of the Company since April
1999 and was so elected pursuant to the terms of the Little Meadow Agreement.
Since August 1998, Mr. Hebard has been an associate at Icahn Associates Corp., a
diversified investment firm. From 1995 to June 1998, Mr. Hebard was an analyst
at J.P. Morgan & Co., Inc., a global financial services company. Mr. Hebard
holds a B.A. in economics from Princeton University.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
For the fiscal year ended December 31, 1998, there were six meetings of
the Board of Directors. From time to time, the members of the Board of Directors
act by unanimous written consent pursuant to the laws of the State of Delaware.
The Board of Directors does not have a standing nominating committee.
The Board of Directors has created an Audit Committee, a Compensation
Committee and a Stock Option Committee. The function of the Audit Committee is
to recommend annually to the Board of Directors the appointment of the
independent accountants of the Company; review with the independent accountants
the scope of the annual audit and review their final report relating thereto;
review with the independent accountants the accounting practices and policies of
the Company; review with the internal and independent accountants the overall
accounting and financial controls of the Company; be available to independent
accountants during the year for consultation; and review related party
transactions by the Company on an ongoing basis and review potential conflicts
of interest situations where appropriate. The Compensation Committee recommends
to the Board of Directors compensation for the Company's key employees. The
Stock Option Committee administers the Company's stock option plans. The members
of the Audit Committee are Messrs. Schmitt, Schall, Sousa and Wyant. The members
of the Compensation Committee are Messrs. Schmitt, Schall and Wyant. The members
of the Stock Option Committee are Messrs. Wyant and Schall.
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<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years indicated, certain
information concerning the compensation of the Company's Chief Executive Officer
and each other most highly compensated executive officers of the Company whose
aggregate compensation exceeded $100,000 during the year ended December 31, 1998
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
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Other Annual Securities
Name and Compensation Underlying All Other
Principal Position Year Salary($) Bonus($) ($)(1) Options(#) Compensation
------------------ ---- --------- -------- ------ ---------- ------------
Michael J. Kirby
<S> <C> <C> <C> <C> <C> <C>
Chief Executive Officer 1998 189,583(2) - - - 85,626(3)
1997 50,350(2) - - 90,000 8,000(4)
Jeffry W. Weiner
Chief Financial Officer 1998 133,920 35,000 - - 9,125(5)
1997 113,750 30,000 - - 7,500(6)
1996 79,167(7) - - 75,000 -
</TABLE>
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(1) Although the officers receive certain perquisites, the value of such
perquisites did not exceed for any officer the lesser of $50,000 or 10%
of the officer's salary and bonus.
(2) Mr. Kirby began employment with the Company in August 1997 at a base
salary of $130,000 per annum. Mr. Kirby's base salary increased to
$200,000 per annum on April 3, 1998. Additionally, Mr. Kirby receives
an auto allowance of $600 per month.
(3) Consists of taxable relocation costs of $78,426 and automobile expenses
of $7,200.
(4) Consists of a relocation allowance of $5,000 and automobile expenses of
$3,000.
(5) Consists of automobile expenses of $5,500 and payout of 1997 accrued
vacation time of $3,625.
(6) Consists of a payout of 1996 accrued vacation time.
(7) Mr. Weiner began employment with the Company in March 1996.
OPTION GRANTS
No stock options were granted to the Named Executive Officers during the year
ended December 31, 1998.
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<PAGE>
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES TABLE
No stock options were exercised by the Named Executive Officers during
the year ended December 31, 1998. The following table sets forth certain
information regarding unexercised options held by each of the Named Executive
Officers at December 31, 1998.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Options Held at Options at
December 31, 1998(#) December 31, 1998($)(1)
----------------------------- -----------------------------
NAME Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Michael J. Kirby 51,000 49,000 155,625 3,750
Jeffry W. Weiner 75,000 - 459,375 -
</TABLE>
(1) Represents the total gain that would be realized if all in-the-money
options held at December 31, 1998 were exercised, determined by
multiplying the number of shares underlying the options by the
difference between the per share option exercise price and the closing
sale price of Common Stock of $12.75 per share as reported on the
Nasdaq SmallCap Market for December 31, 1998. An option is in-the-money
if the fair market value of the underlying shares exceeds the exercise
price of the option.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement, as amended, with
Michael J. Kirby pursuant to which Mr. Kirby has agreed to serve as Chief
Executive Officer and President of the Company, commencing as of August 11, 1997
and expiring on December 31, 2001. The agreement provides for annual base
compensation of $200,000. Mr. Kirby has been granted options to purchase an
aggregate of 90,000 shares of Common Stock. The Board and Mr. Kirby will
mutually agree upon a reasonable performance bonus for Mr. Kirby, if a bonus is
awarded. Mr. Kirby receives a car allowance of $600 per month. Through the term
of Mr. Kirby's employment, the Company will also pay the premiums for a term
life insurance policy, for up to a $1,000,000 death benefit, the beneficiary of
which will be Mr. Kirby's estate or the beneficiary chosen by Mr. Kirby. As of
December 31, 1998, no such insurance policy had been applied for by Mr. Kirby.
The employment agreement provides that Mr. Kirby will not compete or engage in a
business competitive with the current or anticipated business of the Company
during the term of the employment agreement and for a period of one year
thereafter. The agreement also provides that if Mr. Kirby is terminated without
cause (including as a result of liquidation, dissolution or a change of
control), Mr. Kirby will be entitled to receive severance equal to Mr. Kirby's
then-effective base salary for twelve months, and, in the event of a
liquidation, dissolution or a change of control, his stock options will
immediately vest.
The Company entered into an amended and restated employment agreement
with Jeffry W. Weiner on December 15, 1997 pursuant to which Mr. Weiner agreed
to continue to serve as Vice President and Chief Financial Officer of the
Company until December 31, 1999. The agreement may be terminated for any reason
with or without cause. The agreement currently provides for an annual base
salary of $160,000, which may be increased by the Board after the end of each
fiscal year. Mr. Weiner is eligible for an annual incentive cash bonus in an
amount to be determined by the Board of Directors. Mr. Weiner was granted
options to purchase 75,000 shares of Common Stock at an exercise price of $6.00
per share, all of which are vested. The Company's agreement with Mr. Weiner
provides that if Mr. Weiner is terminated other than for cause or change of
control of the Company, Mr. Weiner will be entitled to receive severance equal
to 12 months' base salary (which cannot exceed $135,000). If Mr. Weiner is
terminated upon a merger, consolidation or reorganization by way of a cash
buyout of at least 80% of the Company's stockholders where the Company is not
the surviving corporation or upon the sale of all of the Company's assets, Mr.
Weiner will be entitled to receive a one-time severance payment of $130,000.
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<PAGE>
COMPENSATION OF DIRECTORS
Each eligible non-employee director receives an annual grant of options
to purchase 1,500 shares of Common Stock pursuant to the 1994 Formula Stock
Option Plan (the "Formula Plan") at an exercise price equal to fair market value
on the date of grant and $1,500 per Board meeting attended. The Formula Plan was
adopted to provide an incentive for non-employee directors. Non-employee
directors who hold more than 5% of the outstanding shares of stock of the
Company or who are in control of such a holder are ineligible to receive stock
option grants under the Formula Plan. Non-employee directors may also
irrevocably elect to be ineligible to receive stock option grants under the
Formula Plan. Options to purchase up to 75,000 shares of Common Stock may be
granted under the Formula Plan.
Options are granted under the Formula Plan, without approval or
discretion on the part of the Board, to non-employee directors as follows: each
non-employee director, on the date such non-employee director is elected
receives options to purchase 1,500 shares of Common Stock, which vest and become
exercisable in three equal installments, one-third on the date of grant and
one-third on each of the first and second anniversaries of such grant. Each
non-employee director who has been a director of the Company for at least one
year and has met certain other requirements receives on each January 1 options
to purchase an additional 1,500 shares of Common Stock, which will vest and
become exercisable in two equal installments, one-half on the date of grant and
one-half on the first anniversary of such grant. Currently, options to
purchase 56,000 shares of Common Stock are outstanding under the Formula Plan at
an exercise price between $6.00 and $12.38 per share.
All directors are reimbursed for their reasonable out-of-pocket
expenses incurred in connection with their duties to the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
General. The Compensation Committee determines the cash and other incentive
compensation, if any, to be paid to the Company's executive officers. The Stock
Option Committee is responsible for the administration and award of the
Company's stock option plans.
Compensation Philosophy. The Compensation Committee's executive compensation
philosophy is to base management's pay, in part, on achievement of the Company's
annual and long-term performance goals, to provide competitive levels of
compensation, to recognize individual initiative, achievement and length of
service to the Company and to assist the Company in attracting and retaining
qualified management. The Compensation Committee also believes that the
potential for equity ownership by management is beneficial in aligning
managements' and stockholders' interests in the enhancement of stockholder
value.
Salaries. Base salaries for the Company's executive officers are determined
initially by evaluating the responsibilities of the position held and the
experience of the individual, food industry and management experience and by
reference to the competitive marketplace for management talent. Annual salary
adjustments are determined by: i) evaluating the financial results achieved by
the Company; ii) the performance of the executive particularly with respect to
the ability to manage growth and profitability of the Company; iii) the length
of the executive's service to the Company; and iv) any increased
responsibilities assumed by the executive. The Company has employment agreements
with Messrs. Kirby and Weiner which set base salaries for such individuals.
These base salaries are based on and are reviewed annually in accordance with
factors described in this paragraph and the terms of the employment agreements.
See "Summary Compensation Table - Employment Agreements."
Annual Bonuses. The Company does not currently have a formal bonus plan for its
executives, but from time to time considers the payment of discretionary bonuses
to its executive officers. Bonuses would be determined based upon the level of
achievement by the Company and upon the level of personal achievement by its
executive officers. Mr. Weiner received a $35,000 bonus in 1998.
Compensation of Chief Executive Officer. Mr. Kirby's base salary in 1998 was
$200,000 and was determined by contract.
Compensation Committee: Donald J. Schmitt
Michael P. Schall
John H. Wyant
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<PAGE>
COMPENSATION COMMITTEE INTERLOCKS
For the year ended December 31, 1998, the Compensation Committee
consisted of Messrs. Schmitt, Wyant and Jay G. Shoemaker. Mr. Shoemaker resigned
as a director of the Company in December 1998 and has been replaced by Mr.
Schall as a director and as a member of the Compensation Committee. Except as
set forth in "Certain Relationships and Related Transactions," none of such
Directors was a party to any transaction with the Company which requires
disclosure under Item 402(j) of Regulation S-K.
COMMON STOCK PERFORMANCE
The following graph compares the total return on the Company's Common
Stock from the commencement of trading of the Company's Common Stock on November
12, 1998 to the total returns of the Standard & Poor's Small Cap 600 Index and
the Standard & Poor's Foods Industry Small Cap 600 Index (the "Peer Group").
COMPARISON OF TOTAL RETURN
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Company/Index Name November 12, 1998 December 31, 1998
- --------------------------------- ----------------- -----------------
<S> <C> <C>
Delicious Brands, Inc. $100.00 103.13
S&P Foods (600) Index $100.00 104.60
S&P SmallCap 600 Index $100.00 107.68
</TABLE>
Assumes $100 invested on November 12, 1998 in the Company's Common
Stock, the Standard & Poor's SmallCap 600 Index and the Peer Group. The
calculations in the table were made on a dividends reinvested basis.
There can be no assurance that the Company's Common Stock performance
will continue with the same or similar trends depicted in the above graph.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock of the Company as of April 29, 1999 for (i)
each person known by the Company to own beneficially more than 5% of the
outstanding Common Stock, (ii) each of the Named Executive Officers of the
Company, (iii) each of the Company's directors and (iv) all directors and
officers as a group.
<TABLE>
<CAPTION>
Shares Percent of
Name and Address(1) Beneficially Owned(2) Class(2)
------------------- --------------------- --------
<S> <C> <C>
Michael J. Kirby(3)........................................................... 51,000 1.1
Jeffry W. Weiner(4)........................................................... 75,000 1.7
Donald C. Schmitt(5).......................................................... 105,250 2.3
John H. Wyant(6).............................................................. 26,750 *
Edward Sousa(7)............................................................... 1,011,000 22.8
Michael P. Schall(8).......................................................... 500 *
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Russell D. Glass(9)........................................................... 500 *
George W. Hebard, III(9)...................................................... 500 *
Richard S. Worth(7)(10)(11)................................................... 763,250 16.2
1497 Rail Head Blvd., Unit 2
Naples, Florida 74110-8444
Randye Worth(7)(10)(12)....................................................... 556,750 12.4
3757 Ascot Bend Court
Bonita Springs, Florida 34134
All directors and officers as a group ........................................ 1,270,000 26.3
(8 persons) (3)(4)(5)(6)(7)(8)(9)
</TABLE>
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* Less than one percent (1%) of outstanding Common Stock.
(1) Except as otherwise indicated, the address for each of the named individuals
is c/o Delicious Brands, Inc., 2070 Maple Street, Des Plaines, Illinois 60018.
(2) Except as otherwise indicated, the stockholders listed in the table have
sole voting and investment power with respect to all shares of Common Stock
beneficially owned by them. Pursuant to the rules and regulations of the
Commission, shares of Common Stock that an individual or group has a right to
acquire within 60 days pursuant to the exercise of warrants or options are
deemed to be outstanding for the purposes of computing the percentage ownership
of such individual or group, but are not deemed to be outstanding for the
purpose of computing the percentage ownership of any other person shown in the
table.
(3) Consists of (i) 25,000 shares of Common Stock issuable upon exercise of
options exercisable through August 11, 2008, at a price of $6.00 per share, (ii)
20,000 shares of Common Stock issuable upon exercise of options exercisable
through August 11, 2008, at a price of $12.00 per share and (iii) 6,000 shares
of Common Stock issuable upon exercise of options exercisable through August 11,
1998, at a price of $24.00 per share.
(4) Consists of (i) 50,000 shares of Common Stock issuable upon exercise of
options exercisable through March 18, 2001, at a price of $6.00 per share and
(ii) 25,000 shares of Common Stock issuable upon exercise of options exercisable
through March 14, 2003, at a price of $6.00 per share.
(5) Includes (i) 25,000 shares of Common Stock issuable upon exercise of options
exercisable through November 8, 2004, at a price of $6.00 per share; (ii) 37,500
shares of Common Stock issuable upon exercise of options exercisable through
August 4, 2004 with respect to 6,500 shares, through December 31, 2004 with
respect to 1,500 shares, through December 31, 2005 with respect to 1,500 shares,
through December 31, 2006 with respect to 1,500 shares, through December 17,
2007 with respect to 25,000 shares and through December 31, 2007 with respect to
1,500 shares, all at a price of $6.00 per share; (iii) 750 shares of Common
Stock issuable upon exercise of options exercisable through December 31, 2009,
at a price $12.375; (iv) 13,000 shares of Common Stock issuable upon exercise of
warrants exercisable through April 27, 2001, at a price of $4.00 per share, of
which warrants to purchase 4,000 shares of Common Stock are held by an
individual retirement account ("IRA") for the benefit of Mr. Schmitt, warrants
to purchase 5,000 shares of Common Stock are held by Mr. Schmitt together with
his wife and 4,000 shares are held by an IRA for the benefit of Mr. Schmitt's
wife, of which shares Mr. Schmitt disclaims beneficial ownership; and (v) 16,250
shares of Common Stock issuable upon conversion of 16,250 shares of Series A
Preferred Stock, which automatically convert on August 1, 2001 if not earlier
converted, of which 5,000 shares of Series A Preferred Stock are held by an IRA
for the benefit of Mr. Schmitt, 6,250 shares of Series A Preferred Stock are
held by Mr. Schmitt together with his wife and 5,000 shares of Series A
Preferred Stock are held by an IRA for the benefit of Mr. Schmitt's wife, of
which shares Mr. Schmitt disclaims beneficial ownership. Excludes (i) 40,750
shares of Common Stock held by Donald Schmitt's adult children, of which shares
Mr. Schmitt disclaims beneficial ownership; (ii) 19,600 shares of Common Stock
issuable upon exercise of warrants exercisable through April 27, 2001, at a
price of $4.00 per share, held by Mr. Schmitt's adult children and his mother,
of which shares Mr. Schmitt disclaims beneficial ownership; and (iii) 28,750
shares of Common Stock issuable upon conversion
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<PAGE>
of 28,750 shares of Series A Preferred Stock, which automatically convert on
August 1, 2001 if not earlier converted, held by Mr. Schmitt's adult children
and his mother, of which shares Mr. Schmitt disclaims beneficial ownership.
(6) Consists of (i) 6,250 shares of Common Stock issuable upon exercise of
options exercisable through December 9, 2000, at a price of $2.80 per share;
(ii) 10,000 shares of Common Stock issuable upon exercise of options exercisable
through December 21, 1999, at a price of $0.40 per share; and (iii) 9,750 shares
of Common Stock issuable upon exercise of options exercisable through August 14,
2004 with respect to 6,500 shares, through December 31, 2004 with respect to
1,500 shares, through December 31, 2005 with respect to 750 shares and through
December 21, 2007 with respect to 1,000 shares, all at a price of $6.00 per
share; and (iv) 750 shares of Common Stock issuable upon exercise of options
exercisable through December 31, 2009, at a price of $12.375 per share..
(7) Simultaneously with the consummation of the first closing of a private
placement on December 22, 1997, (i) Richard and Randye Worth sold an aggregate
of 157,500 shares of Common Stock to private investors (together with an
aggregate of 34,500 shares of Common Stock sold by the Worths on March 31, 1998
to private investors, the "Worth Shares") and options to purchase an additional
500,000 shares of Common Stock owned by them at a purchase price of $6.00 per
share (the "Worth Options") at a price of $6.00 per Worth Share and $.0002 per
Worth Option, respectively, and (ii) all of the remaining shares of Common Stock
held by Richard and Randye Worth, including the shares underlying the Worth
Options (the "Trust Shares") were deposited into the Voting Trust, and will be
held in the Voting Trust for a period of two years (but the terms of the Voting
Trust shall be extended to four years when the Worths have received at least
$4,000,000 of gross proceeds from the sale of their shares of Common Stock
(including the sale of the Worth Shares and Worth Options)). Pursuant to a
Voting Agreement with the Company (the "Voting Agreement"), the Voting Trustee,
Edward R. Sousa, has agreed, at any meeting of the stockholders of the Company,
however called, or in any written consent of the stockholders of the Company, to
vote the Trust Shares, and any other shares of Common Stock that may be
deposited in such trust, in accordance with the specific direction of the Board
of Directors of the Company or the recommendation of the Board of Directors to
the stockholders of the Company generally; provided, however, that the Voting
Trustee shall be entitled to vote for the removal of a director of the Company
for Cause (as defined in the Voting Agreement) as permitted by the Delaware
General Corporation Law despite a contrary direction or recommendation of the
Board of Directors.
(8) Consists of 500 shares of Common Stock issuable upon exercise of options
exercisable through February 10, 2009, at a price of $11.375 per share.
(9) Consists of 500 shares of Common Stock issuable upon exercise of options
exercisable through April 11, 2009, at a price of $10.75 per share.
(10) Richard S. Worth and Randye Worth are former husband and wife. Each of them
disclaims any beneficial ownership of the other's Common Stock.
(11) Includes (i) 25,000 shares of Common Stock issuable upon exercise of
options exercisable through September 25, 1999, at a price of $1.60 per share;
(ii) 55,000 shares of Common Stock issuable upon exercise of options exercisable
through October 31, 2000 with respect to 50,000 shares, and December 29, 2002
with respect to 5,000 shares, all at a price of $2.80 per share; (iii) 10,000
shares of Common Stock issuable upon exercise of options exercisable through
December 2, 2002, at a price of $2.50 per share; (iv) 117,500 shares of Common
Stock issuable upon exercise of options exercisable through January 2, 2004, at
a price of $3.20 per share; and (v) 50,000 shares of Common Stock issuable upon
the exercise of options exercisable through July 5, 2005, at a price of $6.00
per share.
(12) Includes (i) 18,750 shares of Common Stock issuable upon exercise of
options exercisable through October 31, 2000, at a price of $2.80 per share;
(ii) 2,500 shares of Common Stock issuable upon exercise of options exercisable
through December 29, 2002, at a price of $2.80 per share; and (iii) 30,000
shares of Common Stock issuable upon exercise of options exercisable through
January 2, 2004, at a price of $3.20 per share.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission"). Officers, directors and greater than ten percent
stockholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file.
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<PAGE>
The Company believes, based solely on review of copies of such forms
furnished to the Company, or written representations that no Form 5's were
required, that all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were complied with
during the year ended December 31, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 13, 1997, the Company entered into separate consulting
agreements with each of Richard and Randye Worth, pursuant to which the Worths
were obligated to provide consulting services to the Company for one year
(the"Consulting Period") and will receive compensation from the Company for five
years. Each agreement provides that the Company may require the Worths' services
for up to 10 hours per week during the Consulting Period. The Company will pay
Mr. Worth and Ms. Worth $111,345 and $106,261 per year, respectively, for five
years, with $11,345 and $6,261, respectively, credited each year toward
repayment of monies owed to the Company of $56,725 and $31,305, respectively.
Each agreement also provides for insurance coverage commensurate with coverage
received by the Company's executive officers, an automobile allowance, and
reimbursement of all business expenses incurred while providing services to the
Company. Mr. Worth will also receive a non-accountable office expense allowance
of $70,000 for the three years, and Ms. Worth received a non-accountable
telephone allowance of $5,000 for one year. Each agreement also contains
confidentiality and non-competition provisions and early termination provisions.
Simultaneously with the first closing of a private placement on December 22,
1997, the Company exchanged with Richard Worth its assets related to its freezer
pop lines for the cancellation of options to purchase 250,000 shares of Common
Stock held by Richard Worth.
The Company's products are distributed by Shur-Good on an exclusive
basis in parts of Ohio, Kentucky and Indiana. Donald C. Schmitt, Chairman of the
Board of Directors of the Company, is the president and principal stockholder of
Shur-Good. During the year ended December 31, 1998, the Company sold
approximately $2.8 million of products to Shur-Good.
During the year ended December 31, 1998, the Company sold approximately
$445,000 of products to an affiliate of Consolidated Biscuit Co.
("Consolidated"). The Company also made purchases totaling approximately
$352,000 from Consolidated. James Appold, a director of the Company until
December 1997, is the president and sole stockholder of Consolidated. The
Company is obligated to Consolidated in the amount of approximately $1,400,000
for discontinued packaging materials. Of such amount, $620,000 was paid during
1998. The remaining balance will be paid in various monthly increments through
March 2000. Total payments to be made during 1999 and 2000 will be $580,000 and
$200,000, respectively. The agreement stipulates that if the Company defaults on
any payment and does not cure the default within 90 days, an additional $200,000
will be added to the unpaid balance and simple interest at an annual rate of 10%
will begin to accrue.
Edward R. Sousa, a director of the Company, as the Voting Trustee of
the Voting Trust containing all of the shares of Common Stock owned by Richard
and Randye Worth, former principal stockholders and officers of the Company,
currently controls an aggregate of 1,011,000 Trust Shares, or 23.0% of the
outstanding Common Stock. Pursuant to the Voting Agreement with the Company, the
Voting Trustee has agreed, at any meeting of the stockholders of the Company,
however called, or in any written consent of the stockholders of the Company, to
vote the Trust Shares, and any other shares of Common Stock that may be
deposited in such trust, in accordance with (i) the specific direction of the
Board of Directors of the Company or (ii) the recommendation of the Board of
Directors to the stockholders of the Company generally; provided, however, that
the Voting Trustee shall be entitled to vote for the removal of a director of
the Company for Cause (as defined in the Voting Agreement) as permitted by the
Delaware General Corporation Law despite a contrary direction or recommendation
of the Board of Directors.
As of August 1, 1998, Donald C. Schmitt and, collectively, his mother
and adult children exchanged $130,000 and $230,000, respectively, principal
amount of 9% Subordinated Convertible Notes for 16,250 and 28,750 shares,
respectively, of Series A Preferred Stock, $.01 par value per share, of the
Company.
During the year ended December 31, 1998, the Company purchased for
distribution and resale $171,441 of products from Guiltless, of which Michael P.
Schall, a director of the Company, is President.
During the year ended December 31, 1998, the Company paid to Michael J.
Kirby, the Chief Executive Officer and President and a director of the Company,
$78,426 in taxable relocation expenses incurred by Mr. Kirby in connection with
his relocation to Illinois.
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<PAGE>
The Company believes all of the arrangements described above are on
terms at least as favorable as could be obtained from unaffiliated parties. The
Company's bylaws provide that all future transactions between the Company and
its officers, directors, principal stockholders or affiliates will be approved
in advance by a majority of the Board of Directors, including all of the
independent and disinterested directors, or, if required by law, a majority of
disinterested stockholders, and must be on terms no less favorable to the
Company than could be obtained in arm's length transactions from unaffiliated
third parties.
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<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.
DELICIOUS BRANDS, INC.
(Registrant)
Dated: April 29, 1999 /S/ MICHAEL J. KIRBY
--------------------------------------------
Michael J. Kirby
President, Director and Chief Executive
Officer
Dated: April 29, 1999 /S/ JEFFRY W. WEINER
--------------------------------------------
Jeffry W. Weiner
Executive Vice President and Chief Financial
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
DATE SIGNATURE
April 29, 1999 *
-------------------------------------------------
Donald C. Schmitt
Director and Chairman
April 29, 1999 *
-------------------------------------------------
Michael P. Schall
Director
April 29, 1999 *
-------------------------------------------------
Edward R. Sousa
Director
April 29, 1999 *
-------------------------------------------------
John H. Wyant
Director
April 29, 1999 /S/ MICHAEL J. KIRBY
-------------------------------------------------
Michael J. Kirby
President, Chief Executive Officer and Director
April 29, 1999
/S/ RUSSELL D. GLASS
-------------------------------------------------
Russell D. Glass
Director
/S/ GEORGE W. HEBARD III
April 29, 1999 -------------------------------------------------
George W. Hebard III
Director
* By: /S/ MICHAEL J. KIRBY
----------------------------
Michael J. Kirby
Attorney-in-fact
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