SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER PERIOD ENDED OCTOBER 31, 1999
Commission File No. 0-25109
Integrated Food Resources, Inc.
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(Name of Small Business Issuer in Its Charter)
State of Nevada 93-1255001
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6700 S.W. Sandburg Street, Tigard, Oregon 97223
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(Address of Principal Executive Offices)
503-598-4375
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(Issuer's Telephone No.)
Issuer has (1) filed all reports required to be filed by Section 13 or 15(d) of
the Exchange Act during the past 12 months (of 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.
As of January 31, 1999, there were 16,184,643 shares of Class A Common Stock
issued and outstanding.
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PART I FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
UNAUDITED
FOR THE PERIOD ENDING OCTOBER 31, 1999
Assets
Current Assets
Cash $ 459
Accounts Receivable 30,632
Intercompany Receivable 4,917
Inventory 0
Prepaid Expenses 100,825
Prepaid Interest 0
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Total Current Assets 136,834
Fixed Assets
Office and Fact. Equip 12,582
Tuna Packing Plant 0
Less Accumulated Depreciation (7,293)
Land Held for Development 74,498,400
Valuation Adj-Foreign Land Grant (74,498,400)
Other Assets 5,100
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Total Fixed Assets 10,389
Intangible Assets
Goodwill -
Less: Amortization 0
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Total Intangible Assets -
TOTAL ASSETS $ 147,223
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Liabilities
Current Liabilities
Accounts Payable $ 84,615
Due from IFR 0
Notes Payable (Stockholder) 264,425
Short Term Notes Payable -
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Total Current Liabilities 349,040
Long Term Liabilities
Longterm Capital Lease -
Long Term Note Payable - Stockholder 0
Long Term Note Payable - Third Party 0
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Total Long Term Liabilities -
TOTAL LIABILITIES 349,040
Equities
Preferred Stock, $.001 par value 10,000,000 shares
authorized, 4,067,087 issued and outstanding 4,067
Additional Paid-in-capital (Preferred) 8,062,222
Class A Common Stock, $.001 par value, 50,000,000
shares authorized, 16,198,966 issued and outstanding 16,199
Additional Paid-in-capital(Common) 213,352
Contributed Capital -
Retained Earnings (8,439,693)
Net Income (57,965)
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Total Equity Accounts (201,818)
Total Liabilities & Owners Equity $ 147,223
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CONSOLIDATED STATEMENTS OF INCOME
UNAUDITED
FOR THE PERIODS ENDING OCTOBER 31
Quarter Ended October 31
1999 1998
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Gross Sales $ - $ 167,089
Cost of Goods Sold - 63,278
SELLING, GENERAL AND ADMIN EXPENSES
Administrative/Consulting 50,113 94,324
Other selling and general 0 185,002
Depreciation & Amortization 871 108,181
Interest Expense 6,980 106,784
Miscellaneous Expense - -
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Total Operating Exp. 57,964 494,291
Total Income (57,964) (390,480)
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Other Income
Interest Income - -
Miscellaneous Income - -
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Total Other Income - -
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Net Income $ (57,964) $ (390,480)
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CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
FOR THE PERIOD ENDING OCTOBER 31, 1999
CASH FLOWS RELATED TO OPERATING ACTIVITIES
Net Loss $ (57,964)
Adjustments to reconcile net loss to cash from
operating activities:
Depreciation and Amortization 871
Increase/Decrease in:
Receivables 3,221
Note Receivable (4,917)
Inventories -
Prepaid Expenses 1,392
Accounts Payable 24,236
Accrued Liabilities -
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Net Cash from Operating Activities 24,803
CASH FLOWS RELATED TO INVESTING ACTIVITIES
Purchase of Equipment (231)
Tuna Packing Plant Costs -
Other Assets -
Goodwill -
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Net Cash from Investing Activities (231)
CASH FLOWS RELATED TO FINANCING ACTIVITIES
Repayment of Related Party Notes Payable 32,325
Repayment of Third Party Notes Payable -
Proceeds from Long Term Capital Lease -
Proceeds from Long Term Notes Payable - Third Party -
Proceeds from Long Term Notes Payable - Stockholders -
Issuance of Preferred Stock -
Issuance of Common Stock -
Additional Paid-in-Capital-Preferred -
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Net Cash from Financing Activities 32,325
Net Increase (Decrease) in Cash (1,067)
CASH, BEGINNING OF PERIOD 1,527
CASH, END OF PERIOD $ 460
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<TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
UNAUDITED
FOR THE PERIOD ENDING OCTOBER 31, 1999
Total
Common Stock Preferred Stock Additional Accumulated Stockholders'
Shares Amount Shares Amount Paid-in-Capital Deficit Equity
---------- -------- --------- ------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance July 31, 1999 16,198,966 $ 16,199 4,067,087 $ 4,067 $ 8,275,574 $(8,439,693) $ (143,853)
Contributed Capital -
Net Loss $ (57,964) (57,964)
Balance October 31, 1999 16,198,966 $ 16,199 4,067,087 $ 4,067 $ 8,275,574 $(8,497,657) $ (201,817)
</TABLE>
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
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RESULTS OF OPERATIONS
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Review of Operating Results
Seabourne Ventures, Inc. (Seabourne)
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As previously disclosed in Form 10-QSB for the 2nd quarter of Fiscal
Year 1999, all tuna packing operations have been suspended while Company
management identifies and establishes the necessary means to take full control
of the sourcing operation for raw material. The key to asserting this control is
the deployment of the Company's own fleet of fishing and factory processing
vessels.
ClipperNet Corporation, Inc. (ClipperNet)
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On September 9, 1999, the Company's Board of Directors approved a plan
to reorganize ClipperNet under which ClipperNet's management group will take
control of that company. ClipperNet's common stock will be subject to a 20 to 1
reverse split which will reduce the Company's holdings in ClipperNet from
1,000,000 shares to 50,000. ClipperNet's management group collectively owns
1,015,702 shares of the Company's common stock which they will invest in
ClipperNet in exchange for 1,523,554 shares of new issue ClipperNet common
stock. Five creditors who were holding ClipperNet notes payable totalling
$693,849 have converted these debt obligations into equity at the rate of
$2.00/share into 346,925 shares of new issue ClipperNet common stock. As a
result of these transactions, the Company's ownership position in ClipperNet has
been reduced from 100% to 2.6% (50,000 shares out of 1,870,479 total
outstanding).
Under the reorganization agreement, the 1,015,702 shares of the
Company's common stock surrendered by the ClipperNet management group are being
held by an escrow agent, and the Company has an unconditional, ten-year option
to repurchase these shares. This option can be exercised at the Company's
discretion by tendering to ClipperNet whichever of the following has the lesser
monetary value: 1) a cash payment of $4,570,659 or 2) its 50,000 shares of
ClipperNet common stock. The cash payment is calculated on the basis of
1,015,702 shares multiplied by $4.50 (the agreed
<PAGE>
upon share value). The value of the Company's 50,000 shares will be based on the
market price of the ClipperNet stock at the time the option is exercised.
Further to the reorganization agreement, Ransom R. Southerland tendered
his resignation without reservation from the Company's Board of Directors, and
Alain L. de la Motte and James M. McKenzie tendered their respective
resignations also without reservation from ClipperNet's Board of Directors. All
resignations have been unanimously approved. Closing on the terms and conditions
of the reorganization took place on October 1, 1999.
Integrated Food Finance Corp. (IFFC)
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On September 7, 1999, Morningstar Finance, Inc. filed Restated Articles
of Incorporation changing its name to Integrated Food Finance Corp. IFFC
continues to explore sources of financing for the various Company projects.
Capital Needs and Future Requirements
Seabourne
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The Company continues to pursue the construction of six combination
fishing/factory ships with an approximate cost of $180 million. The design of
these fishing vessels has been completed. It is anticipated that the first of
the vessels will be operational by the third quarter of fiscal year 2000.
ClipperNet
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Given its reorganization, responsibility for identifying ClipperNet's
capital needs and future requirements have been transferred from the Company to
the new management group.
IFFC
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IFFC was organized for the purpose of obtaining debt financing for the
Company's projects, specifically the construction of the fishing vessels and
Project Harvest(R). IFFC continues to explore sources of financing for the
various Company projects.
Capital-Intensive Projects
Project Harvest(R) continues to advance through the development and
planning process. Project Harvest(R) links global buyers and sellers of food
products via secure internet connections, and it will enable them to consummate
business to business E-commerce transactions. Buyers will be able to identify
specific suppliers who meet their customized requirements for hazard control,
food safety, process control, hygiene, manufacturing practices, financial
stability and product quality. Project Harvest(R) will create the first global
standard for the rating of factories and product quality. This business to
business E-Commerce technology is expected to revolutionize the way food
products are bought and sold worldwide.
<PAGE>
The Company's expected funding requirements to finish the software
development, hire the management team and complete the business plan remains as
previously disclosed at approximately $10 million. These funds will be provided
from the proceeds of the Letter of Commitment.
ClipperNet
Given its reorganization, responsibility for identifying ClipperNet's
capital-intensive projects have been transferred from the Company to the new
management group.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
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The Company's previously disclosed civil action against Kennedy
Funding, Inc. (KFI) remains under litigation. Certain facts deemed detrimental
to the defendant were discovered during depositions, and the Company's complaint
has been broadened to include two additional counts of fraud. A trial date for
this matter has been set in the Superior Court of New Jersey, Bergen County Law
Division, for March 6, 2000. The Company will continue to vigorously defend its
position, and it remains confident it will receive a favorable final judgment.
No adverse material outcome is expected.
Item 2 - Changes in Securities and Use of Proceeds
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During the covered period, there were no changes in the number of
issued and outstanding shares in any class of the Company's securities. The
total of Class A Common Stock issued and outstanding as of the end of the
Company's first fiscal quarter is 16,198,966 shares.
Item 3 - Defaults on Senior Securities
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During the covered period, there were no defaults on any senior
securities.
Item 4 - Submission of Matters to a Vote of Security Holders
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During the covered period, no matters were submitted to a vote of the
shareholders.
Item 5 - Other Information
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The following additional matters of interest occurred during the
covered period.
On October 8, 1999, the Board reappointed Oxford Transfer & Registrar
as the Company's stock transfer agent.
Item 6 - Exhibits
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<PAGE>
On October 12, 1999, Form 8-K Current Report, Disposition of Assets was
filed regarding ClipperNet. All relevant and previously disclosed exhibits
incorporated by reference. No new exhibits are attached.
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INDEX TO EXHIBITS
Incorporated by
Filed Referenced from
No. Exhibit Description Here Form Date Exhibit
<S> <C> <C> <C> <C> <C>
2.0 Documents Comprising
the Reorganization of
ClipperNet Corporation No 10-KSB/A 12/20/99 2.0
3.8 Restated Articles of Incorporation
of Morningstar Finance, Inc. No 10-KSB/A 12/20/99 2.0
3.9 Bylaws of Morningstar
Finance, Inc. No 10-KSB/A 12/20/99 2.0
</TABLE>
<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.
Integrated Food Resources, Inc.
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(Registrant)
/s/Alain L. de la Motte
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Alain L. de la Motte
Chief Executive Officer
