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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ ] Annual report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended June 30, 1996
---------------------------
[ ] Transition report under Section 13 or 15(d)of the Securities Exchange
Act of 1934
For the transition period from to
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Commission file number 0-12775
Odessa Foods International, Inc.
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(Name of Small Business Issuer in Its Charter)
Delaware 75-1613360
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
One Evertrust Plaza, Jersey City, New Jersey 07302
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(Address of Principal Executive Office) (Zip Code)
718-646-4175
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock par value $.00001 per share
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(Title of Class)
Check 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 past 90 days. Yes xx No
--- ---
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
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-KSB
or any amendment to this Form 10-KSB. [ ]
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State issuer's revenues for its most recent fiscal year - $514,513
The aggregate market value for the 7,135,390 shares of voting stock
(all of one class of $.00001 par value Common Stock) held by non-affiliates * of
Registrant as of October 1, 1996 is $10,703,085 based upon an average of the bid
($1.25) and asked ($1.75) prices for such stock on the date heretofore
indicated. See Item 5 (a) which indicates the limited, if any, trading activity
in the Registrant's securities for the periods indicated. By virtue hereof, it
is difficult if not impossible to accurately arrive at a completely realistic
"aggregate market value" of Registrant shares held by non-affiliates as called
for herein especially in view of the fact that the existence of limited or
sporadic quotations should not of itself be deemed to constitute an "established
public trading market". The above statements regarding "aggregate market value"
and "established public trading market" should be taken into careful
consideration when considering the information contained herein regarding the
indicated "aggregate market value" of shares of voting stock held by
non-affiliates.
* Affiliates for the purpose of this item refers to the Registrant's
officers and directors and/or any persons or firms (excluding those
brokerage firms and/or clearing houses and/or depository companies
holding Registrant's securities as record holders only for their
respective clienteles' beneficial interest) owning 5% or more of the
Registrant's Common Stock, both of record and beneficially - all as of
October 1, 1996.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS
Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes No
--- ---
Not Applicable
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. 11,471,077 shares as of
October 1, 1996. (1)
Transitional Small Business Disclosure Format: Yes No
--- ---
(1) Included in the issued and outstanding shares throughout this Form
10-KSB are an aggregate of 341,050 shares of common stock (i.e.
approximately 3% of all issued and outstanding shares) currently owned
of record and beneficially by certain former directors of the Company's
predecessor (at a time when it was known as Fluid Lift International,
Inc.), which shares are currently the subject of litigation wherein the
Company has alleged that there was never any valid consideration given
for the issuance of such shares. See "Litigation".
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DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to
security-holders; (2) any proxy or information statement; and (3) any prospectus
filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities
Act").
None
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
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PART I
<S> <C>
Item 1. Description of Business 5
Item 2. Description of Property 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of
Security Holders 11
PART II
Item 5. Market For Common Equity and Related
Stockholder Matters 12
Item 6. Management's Discussion and Analysis
or Plan of Operation 13
Item 7. Financial Statements 15
FF1 - FF11
F1 - F11
Item 8. Changes in and Disagreements With
Accountants on Accounting and
Financial Disclosure 16
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance With
Section 16(a) of the Exchange Act 16
Item 10. Executive Compensation 19
Item 11. Security Ownership of Certain Beneficial
Owners and Management 20
Item 12. Certain Relationships and Related
Transactions 22
Item 13. Exhibits, List and Reports on Form 8-K 22
</TABLE>
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
BACKGROUND SUMMARY
The Company was incorporated under the laws of the State of Delaware in
June 1972 under the name Aurre Management Co., Inc. and in January of 1982
changed its name to Fluid Lift International, Inc. Its business plans were
unsuccessful and it ceased operations in 1988. In January of 1995 the Company
changed its name to its current name - Odessa Foods International, Inc.
Pursuant to written contract dated November 26, 1994, Odessa Foods,
Inc. (hereinafter "Odessa Foods"), a Delaware corporation, exchanged 300 shares
of common stock for all of the issued and outstanding shares of F&L Food &
Leisure Marketing Ltd. (an Irish corporation; hereinafter "F&L") which latter
corporation owns a 95% interest in Hilmac GmbH, Odessa (a Ukrainian corporation;
hereinafter "Hilmac"). The 300 shares of common stock of Odessa Foods issued to
shareholders of F&L represented 30% of the outstanding shares of Odessa Foods.
Accordingly, upon conclusion of this transaction, F&L became a wholly owned
subsidiary of Odessa Foods.
Immediately thereafter and on November 26, 1994 a written contract was
entered into between the shareholders of Odessa Foods and the Company (then
known as Fluid Lift International, Inc. and currently known as Odessa Foods
International, Inc.). In accordance with the terms of such contract the Company
issued 8,500,000 shares of its common stock to the shareholders of Odessa Foods
in exchange for all of the outstanding shares of Odessa Foods. Accordingly, upon
conclusion of this transaction Odessa Foods became a wholly owned subsidiary of
the Company.
The transactions indicated directly above have been accounted for as a
pooling of interest and accordingly, the Company's audited consolidated
financial statements included herein have been restated to include the accounts
of the Company, Odessa Foods and Hilmac.
Further, and as a direct result of the above referenced transactions,
the Company, through its aforesaid subsidiaries, presently engages in the
manufacture of sausages and related food products in Odessa, Ukraine. Hilmac,
founded in September 1992, installed, in 1993, the first western equipped meat
factory in Odessa, Ukraine, thereafter commenced production in May 1993 and is
in the process of building (as hereinafter indicated) the first fully integrated
food production facility in the Ukraine.
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The organizational chart appearing immediately below is intended to
give on overview and summary to the narrative information contained directly
above and hereinafter.
ODESSA FOODS INTERNATIONAL, INC.
Organizational Chart
Odessa Foods International, Inc.
formerly Public Company
Fluid Lift International, Inc.
Odessa Foods Inc.
(a Delaware corporation)
formerly Wholly owned
F&L Food & Leisure Marketing LTD. Subsidiary
(an Irish corporation)
Hilmac GmbH, Odessa a 95% owned
Subsidiary of
(an Ukrainian corporation) Odessa Foods Inc.
CURRENT POSITION AND RECENT ACTIVITIES
The Company continues to operate its own sausage manufacturing and meat
production facility in order to produce, fresh and on a daily basis, a wide
range of sausages utilizing what it considers to be a technologically advanced
installation in Odessa, Ukraine. Its present factory is being expanded into a
fully integrated food production plant anticipated to be operational by late
1997/early 1998 with meat and sausage production expected to be supplemented by
a modern slaughter house (plant and machinery having recently been purchased in
Switzerland) fully disassembled and expected to be ready for shipment to new
Company premises in Teplodar, near Odessa, for reassembly in late 1997 (after
the building for production has been erected). Once operational (and operating
in accordance with European Union standards and supplied from piggeries
functioning in accordance with Western standards) the Company expects to employ
approximately 300 to 350 persons thereby creating a capacity for slaughtering
and processing of approximately 1,500 pigs and 400 cattle per day with
approximately half of the meat processed into sausage production and the balance
to be sold on the market in the form of raw meat.
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COMPETITION
The Company's sausage products (around 2 tons of which are produced
fresh each day according to Swiss recipes) are slightly more expensive than
those produced by local competitors but management considers such products to be
of a higher quality thereby creating greater demand (and sales) for such
products notwithstanding the fact that local producers put slow-cured goods onto
the market, i.e. goods with a longer shelf-life.
Management has taken the above circumstances into account in its
expansion plans and intends to expand its plant facilities accordingly so that
the Company is in a position to manufacture products with a longer shelf life at
a high level with the end price (retail) for its goods not being substantially
higher than local competitors.
Production is expected (as aforesaid) to be relocated to the new
premises in Teplodar in 1997 with daily output capacity expanded to 15 tons per
day. Once operational it is also expected that pasta production will be at a
daily production capacity of 20 tons.
A secondary, and significant source of competition to the Company comes
from products manufactured abroad, subsequently packaged and treated with
various chemical substances so as to provide for a longer shelf life, which
products generally are only available at high prices in local currency terms.
SALES
Company plans are to establish a network of sales outlets in various
marketing centers and, wherever possible, in the larger food stores in a
separate "Odessa" department in which only Company product is sold. Management
anticipates that such plan can be particularly advantageous to the Company for
the following reasons:
a. - Theft and shrinkage are not at Company expense, since it will not use
its own employees for whom it is responsible;
b. - Potential elimination of leftover stock which the Company would
otherwise have to take back;
c. - Elimination of numerous problems relating to hiring of its own
employees (staff); and
d. - Elimination of significant rental and related overhead expenses.
Additionally the Company is in the process of planning a three part
marketing network as follows:
1. Sales directly from factory;
2. Sales in major shopping centers and grocery shops (as aforesaid); and
3. Sales via mobile sales vans (equipped with necessary refrigeration
units).
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The Company intends to offer its products to the market which products
are to be
i. - manufactured from local raw materials utilizing local labor;
ii. - of a higher quality;
iii. - bought fresh daily; and
iv. - priced so that a majority of the population can buy the products at
reasonable price/quality ratios.
Company aims and goals include becoming a significantly recognized
sausage production (and related products) manufacturer utilizing both Swiss
recipes and technology and subsequently engaging in export activities so as to
annex export markets in the Commonwealth of Independent States and neighboring
countries, as well as supplying various passenger fleets of major shipping
lines.
TERRITORIES AND EMPLOYEES
Company current marketing activities are primarily within the Odessa,
Ukraine area with its over 3,000,000 inhabitants; Odessa being the largest ex
Soviet harbor with a duty-free zone thereby attracting in excess of over
2,000,000 tourists per annum. Geographically it is within the reach (of a few
hours) of a number of cities with populations of approximately 3,000,000 to
4,000,000 inhabitants.
Costs of goods sold by the Company contain direct and indirect
production costs as well as packaging and storage costs while sales agents are
engaged primarily on a commission basis.
The Company currently employs approximately 65 persons, 21 of whom are
engaged in meat production and related activities, 20 of whom are engaged in
engineering and building activities, 6 of whom are engaged in administration
(accounting, administrative and translation activities) with the balance of
approximately 18 being engaged in sales (3), drivers and deliveries (5),
cleaning and storage (2) and security-24 hours a day, 7 days a week (8). It is
anticipated (although no assurance can be given) that the number of employees
will grow to approximately 180 when pasta and meat production lines in the new
Teplodor premises are in full production. Additionally, the slaughter house is
expected to provide employment for an approximate 300 local people.
PROMOTION AND SPONSORSHIP
In the effort to promote the Company and create further identification
within the local Odessa community as well as with local Odessa regulators, the
Company sponsored (in conjunction with Republic National Bank and others) the
Odessa Philharmonic Orchestra's visit to the United Nations General Assembly for
the performance of the Chernobyl Memorial Concert on April 25, 1996, which
concert, in addition to being held at the United Nations, was broadcast live on
WNYC in New York and was simulcast on national public radio stations throughout
the United States.
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FUTURE CORPORATE STRATEGY AND PROJECTIONS
Current Company corporate strategy is to create a fully vertically
integrated production chain for meat and sausage production. The slaughter house
(heretofore referred to) is to be erected upstream from operating meat and
sausage factory so as to enable a supply of high-quality raw materials processed
by up-to-date methods with the animals for slaughter being supplied from
fattening units with whom firm purchasing and delivery contracts exist and/or
are being negotiated. The products of the meats and sausage factory will then be
put on the market.
At a future date the sausage and pasta factory being established in
Teplodar is to be expanded into a four-section production unit so as to include
pasta, canned products as well as sweets, pastries and bread in order to produce
a broad range of food for daily consumption. The chart appearing directly below
summarizes current and proposed activities including projected activities as
heretofore indicated in narrative fashion.
<TABLE>
<CAPTION>
Suppliers Production Distribution
<S> <C> <C> <C>
Piggery sales Slaughter Sausage & factory sales
House Meat
mobile
Pasta Line sales van
Cattle farming Canned food
Retail
Sweets
</TABLE>
RECENT DEVELOPMENTS
Subsequent to the close of the Company's fiscal year and most recently
during the first week of October 1996 it reported that three pasta lines were
fully installed and ready for production at its new premises in Teplodar near
Odessa. These three pasta production lines, including six silos for 20 tons of
flour each, have a production capacity of 30 tons of pasta per day and are part
of the Company's project wherein a 80,000 square foot food processing facility,
pasta, sausage and other meat products, canned meat and sweets intend to be
produced. Further, the Company will be producing approximately one ton per day
in order to make eventual quality adjustments required by its clientele with the
expectation that production will be raised to 10 tons per day thereafter with
full production of 30 tons per day planned and projected for mid 1997.
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The slaughter house heretofore referred to as having been recently
purchased has been fully disassembled and is ready to be shipped to Teplodar for
reassembling in late 1997. The sausage and meat production facility currently
producing 1.5 tons per day in Odessa will be moved into such new facilities
during 1997 thereby increasing production capacity to 30 tons per day in the
manner indicated directly above.
There can be no assurance that the aims and goals indicated directly
above can be achieved within the foreseeable future, if ever, or that the
necessary expenditures inherent in attempting to achieve such goals will result
in sufficient revenues so as to justify the time and effort involved as well as
the expenditure incurred.
ITEM 2. DESCRIPTION OF PROPERTY
In addition to the Company's U.S. offices located in Jersey City, New
Jersey, the Company maintains principal offices in the Ukraine. With respect to
the latter offices, the Company entered into an operating lease agreement with
an unaffiliated landlord (in April 1995) for a term of 25 years for the rental
of an unfinished building (approximately 8,000 square meters) in the Ukraine
intended to be utilized as its manufacturing facility. In accordance with the
terms of the Agreement, the Company is required to pay all alteration and
improvement charges which, upon completion, will be deducted from monthly rental
charges until all costs are recovered. Prepaid lease costs at June 30, 1996
amounted to approximately $504,000. For further information with respect to the
aforesaid lease agreement as well as minimum annual lease payments (excluding
percentage of sales) reference is herewith made to note 5 to the Company's
consolidated financial statements. The facility has been renovated, fitted with
offices and with production lines established.
Located at the Company's aforesaid Ukraine facility is various property
and equipment consisting primarily of production equipment, transportation
equipment and vehicles and office equipment. Such property and equipment is
valued at approximately $3,200,000 less accumulated depreciation which reduces
such valuation to approximately $2,700,000. Production equipment accounts for
approximately 98% of all property and equipment.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently a part to any material litigation nor, to
the knowledge of management, is any material litigation threatened except as
indicated directly hereinunder.
On October 1, 1993 the Board of Directors of the Company's corporate
predecessor (then known as Fluid Lift International, Inc.) purported to
authorize the issuance of 14,391,300 (old - pre-split) shares of its then $.01
par value common stock for "services rendered" and valued at $143,913. The
company's then President (since resigned and having no position whatsoever in
the Company or any relationship to its business activities) received 13,191,300
of such shares of common stock and a further 1,200,000 shares were issued to
four other individuals (300,000 shares per individual; at least three of whom,
upon information and belief, are immediate members of such former President's
family). When adjusted for the Company's subsequent 1 for 68 reverse stock split
the 13,191,300 shares currently represent 193,990 shares while the 1,200,000
shares (300,000 to each of four persons) currently represent 17,648 shares.
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Thereafter, on October 5, 1993, the same Board of Directors purported
to authorize issuance to such former President of an additional 50,000,000
shares - later adjusted to 44,000,000 shares - for "services rendered". These
shares were not, however, issued until May of 1994 and represent the equivalent
of 647,059 post 1 for 68 reverse split shares. A balance of 129,412 of such
647,059 post split shares are indicated - on the Company's transfer records - as
being "owned" of record and beneficially by such former President.
When giving effect to all of the above transactions such former
President and the four other individuals referred to currently claim to own an
aggregate of 341,050 Company shares, with such former Company President claiming
to own 323,402 of such shares.
All of the above referenced shares have borne a restrictive legend from
date of issuance which the Company has recently refused to remove. Proper
ownership, if any, remains in dispute until such time, if ever, as such
stockholders are able to prove, amongst other matters, that such shares were
issued for valid consideration. To date written requests for such proof have
gone unanswered.
The Company's transfer agent, in a Complaint for Interpleader,
Declaratory Judgment and related relief commenced an action in the United States
District Court for the District of Utah, Central Division under Index No.
96CV0194B, has tendered to the Court Company stock certificates representing
133,824 of the aforesaid 341,050 shares in dispute (and upon information and
belief intends to tender any further portion of such 341,050 shares as may come
into its possession) in an effort to seek Court determination as to true
ownership and a Court Order regarding issuance or cancellation of such
certificates. The Company is a party defendant to this action, in which its
transfer agent seeks indemnification from the Company for any sums which may be
awarded against such transfer agent by reason of its compliance with the
Company's instructions to not remove restrictive legend(s) from the certificates
in question. Owing to the current early stages of the litigation and further
owing to the fact that discovery proceedings have not even been scheduled as
yet, it is virtually impossible to determine, with any degree of certainty, the
final outcome of this litigation although the Company fully expects to prevail
on all material aspects of this lawsuit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
As reported in the Company's Form 10-KSB for its fiscal year ended June
30, 1995, its last annual meeting was held in September 1993. While the Company
does currently intend to hold an annual meeting of stockholders for its fiscal
year ended June 30, 1996 it has not, as yet, formalized any specific plans as to
any proposed date for such meeting.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Marketing Information. The following table sets forth, for the
periods indicated, the range of high and low bid prices on the dates indicated
for the Company's securities indicated below for each full quarterly period
within the two most recent fiscal years (if applicable) and any subsequent
interim period for which financial statements are included and/or required to be
included.
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 1995 Quarterly Common Stock Price
By Quarter Ranges (1)
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Quarter Date High Low
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<S> <C> <C> <C>
1st September 30, 1994 (2) (2)
2nd December 31, 1994 (2) (2)
3rd March 31, 1995 (2) (2)
4th June 30, 1995 $2.25 $1.75
<CAPTION>
Fiscal Year Ended June 30, 1996 Quarterly Common Stock Price
By Quarter Ranges (1)
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Quarter Date High Low
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<S> <C> <C> <C>
1st September 30, 1995 $2.50 $1.00
2nd December 31, 1995 $2.50 $1.25
3rd March 31, 1996 $3.00 $1.75
4th June 30, 1996 $2.40 $1.50
<CAPTION>
Fiscal Year Ended June 30, 1997 Quarterly Common Stock Price
By Quarter Ranges (1)
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Quarter Date High Low
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<S> <C> <C> <C>
1st September 30, 1996 $1.875 $ .97
</TABLE>
(1) The existence of limited or sporadic quotations should not of itself be
deemed to constitute an "established public trading market". To the
extent that limited trading in the Company's Common Stock has taken
place, such transactions have been limited to the over-the-counter
market (except as otherwise may be indicated hereinafter). All prices
indicated herein are as reported to the Company by broker-dealer(s)
making a market in its securities in the National Quotation Data
Service ("pink sheets") and/or in the Electronic Over-the-Counter
Bulletin Board (the latter under the symbol ODSA). The aforesaid
securities were not traded or quoted on any automated quotation system
(other than as may be indicated herein). The over-the-counter market
quotes indicated above reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent
actual transactions.
(2) The Company has been unable to obtain any reliable stock price quotes
for the periods indicated. The first printed quotation it has been able
to receive has been as of April 26, 1995, at which time the bid price
of $2.25 was indicated for a relatively low volume of trades. Since
such date trading has continued on a sporadic basis with reported
volume during the most recent quarter ended September 30, 1996 having
exceeded 20,000 shares on only six occasions, with any reported sales
volume indicated for only 15 days during such period.
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(b) Holders. As of October 1, 1996 the approximate number of
stockholders of the Company's Common Stock (as indicated on its transfer agent's
October 1, 1996 certified list of stockholders) amounted to 1,128 persons and/or
firms (inclusive of those brokerage firms and/or clearing houses and/or
depository companies holding the Company's securities for their respective
clientele - each such brokerage house, clearing house and/or depository firm
being considered as one record holder). The exact number of beneficial owners of
the Company's securities is not known but would necessarily exceed the number of
record owners indicated above in that brokerage firms and/or clearing house
and/or depository companies are normally record owners for presumably any number
of unidentified beneficial owners.
(c) Dividends. The payment by the Company of dividends, if any, in the
future rests within the discretion of its Board of Directors and will depend,
among other things, upon the Company's earnings, its capital requirements and
its financial condition, as well as other relevant factors. The Company has not
paid or declared any dividends upon its Common Stock since its inception and, by
reason of its present financial status and its contemplated financial
requirements, does not contemplate or anticipate paying any dividends upon its
Common Stock in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Odessa Foods International, Inc. (the "Registrant") is engaged, through
its subsidiaries (Odessa Foods Inc. and Hilmac GmbH) in the manufacture of
sausages and related food products in Odessa, Ukraine.
This discussion summarizes the significant factors affecting the
consolidated operating results, financial condition and/or liquidity/cash flows
of Registrant during the two year period ended June 30, 1996 and should be read
in conjunction with the consolidated financial statements and notes thereto
included in such reports.
As indicated in Footnote 1 to the consolidated financial statements for
fiscal year ended June 30, 1995, the Company acquired its wholly owned
subsidiary, Odessa Foods, Inc., in November of 1994. The acquisition has been
reflected in the financial statements using the pooling of interest method of
accounting. Accordingly, the financial statements for all periods presented have
been restated to include the accounts of Odessa Foods International, Inc.
(parent), its wholly owned subsidiary, Odessa Foods, Inc. (a Delaware
corporation) and the latter's majority owned subsidiary, Hilmac GmbH, Odessa (a
Ukrainian corporation). See also Footnote 2 to consolidated financial statements
for fiscal year ended June 30, 1996.
Consolidated Statements of Operations:
Comparative fiscal years ended June 30, 1996 and June 30, 1995.
Sales for the fiscal year ended June 30, 1996 were $514,513 as compared
to sales of
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$274,419 for fiscal year ended June 30, 1995, while cost of sales increased from
the preceding fiscal year 1995 from $237,188 to $414,633 resulting in a gross
profit for fiscal year 1996 of $99,880 as compared to $37,231 for the preceding
fiscal year. Operating expenses increased by $431,657 (from $551,983 to $983,640
during the comparative year). Primarily as a result of the above, the net loss
for fiscal year ended June 30, 1996, i.e. $(893,621) was $380,864 greater than
the $(512,757) net loss of the preceding fiscal year.
Total assets of the Company at fiscal years ended June 30, 1995 and
1996 were $2,752,965 and $3,760,831 respectively; an increase of $1,007,866.
Such increase may be principally accounted for as follows: an increase in (a)
current assets of $101,027 (primarily as a result of an increase in cash of
$103,758), (b) property and equipment of $525,227 (after taking into account
accumulated depreciation) and (c) prepaid lease costs of $417,612. When adding
the aforesaid increases in total current assets, property and equipment and an
increase of $381,612 in total other assets (primarily due to increase in prepaid
lease costs) the aforesaid $1,007,866 increase in total assets if fully
accounted for. Total current assets increased by $101,027 primarily as a result
of the aforesaid increase in current assets - cash.
Total current liabilities of the Company at comparative years ended
June 30, 1995 and 1996 were $340,763 and $553,240 respectively; an increase of
$212,477. Such increase in total current liabilities is attributable to
increases in (a) accounts payable and accrued expenses of $92,174 and (b) loans
payable of $120,303. The loans payable referred to herein relate to advances
received from two members of the Company's Board of Directors.
Consolidated Balance Sheets:
Primarily as a result of total paid-in capital having increased by
$1,689,010 and accumulated deficit having increased by $893,621, stockholders'
equity increased from $2,412,202 at June 30, 1995 to $3,207,591 at June 30,
1996; an increase of $795,389. The aforesaid increase in additional paid-in
capital resulted from Registrant's sale of shares of its common stock during the
fiscal year ended June 30, 1996; the Registrant having sold 1,454,970 shares of
its common stock during such period for a cash consideration of $1,679,010 and
having further issued 100,000 shares for services valued at $10,000. A
significant portion of such funds were utilized for the purchase of property and
equipment and for prepaid lease costs both as heretofore indicated.
Working capital (deficit) for the fiscal year ended June 30, 1996 was
$(327,989) as compared to a working capital deficit of $(216,539) for the
comparative fiscal year ended June 30, 1995. See note 1 to the June 30, 1996
consolidated financial statements which note indicates, in part, certain factors
which create an uncertainty about the Company's ability to continue as a going
concern; such factors primarily relating to the Company having sustained
substantial operating losses in each of its two most recent fiscal years and the
fact that, as aforesaid, its current liabilities exceed its current assets by
$327,989. Notwithstanding the concerns expressed, Company management
nevertheless believes that the Company will be able to continue its operations
through (a) the raising of additional capital through either debt or equity
financing if
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necessary and/or (b) the belief that its operations (through utilization of
equipment recently purchased and establishment of new and larger facilities -
see Item 1 hereof) will improve sufficiently through increased sales volume and
productivity. See also note 7 with respect to approximately $170,000 in loans
payable which represent advances made to the Company by two of its Board
members.
The Company does not anticipate any significant changes in the number
of its employees except as heretofore indicated in Item 1 - Description of
Business, Territories and Employees. Excepting as indicated therein no formal
plans with regard to hiring of any significant number of other additional
employees currently exists.
ITEM 7. FINANCIAL STATEMENTS
The following financial statements have been prepared in accordance
with the requirements of Regulation S-B and supplementary financial information
included herein, if any, has been prepared in accordance with Item 302 of
Regulation S-K, such information appears on pages FF-1 through FF-11 inclusive
for fiscal year ended June 30, 1996 and pages F-1 through F-11 inclusive for
fiscal year ended June 30, 1995 of this Form 10-KSB, which pages follow this
page.
ODESSA FOODS INTERNATIONAL, INC.
JUNE 30, 1996
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report FF-1
Consolidated Balance Sheet FF-2
Consolidated Statements of Operations FF-3
Consolidated Statement of Stockholders' Equity FF-4
Consolidated Statement of Cash Flows FF-5
Notes to Consolidated Financial Statements FF-6 - FF-11
ODESSA FOODS INTERNATIONAL, INC.
JUNE 30, 1995 AND 1994
CONTENTS
Page
----
Independent Auditor's Report F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Stockholders' Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6 - F-11
</TABLE>
15
<PAGE> 16
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Odessa Foods International, Inc.
We have audited the accompanying consolidated balance sheet of Odessa
Foods International, Inc. and subsidiaries as of June 30, 1996 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for an opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Odessa Foods
International, Inc. and subsidiaries at June 30, 1996 and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed, in
Note 1 to the consolidated financial statements, the Company's significant
operating losses and limited sources of financing raise substantial doubts about
the Company's ability to continue as a going-concern. Management plans in regard
to these matters are described in Note 1. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ ALLEN G. ROTH, P.A.
ALLEN G. ROTH, P.A.
New York, New York
September 16, 1996
FF-1
<PAGE> 17
ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash $ 185,099
Accounts receivable, less allowance for doubtful
accounts of $3,400 23,731
Inventories 16,421
-----------
TOTAL CURRENT ASSETS 225,251
-----------
PROPERTY AND EQUIPMENT, less accumulated
depreciation of $528,217 (Note 3) 2,752,705
-----------
OTHER ASSETS:
Intangible Assets, less amortization of $81,000 (Note 4) 279,000
Prepaid lease costs (Note 5) 503,875
-----------
TOTAL OTHER ASSETS 782,875
$ 3,760,831
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 307,937
Notes payable - bank (Note 6) 75,000
Loans payable (Note 7) 170,303
-----------
TOTAL CURRENT LIABILITIES $ 553,240
-----------
COMMITMENTS AND CONTINGENCIES
(Notes 1, 5, 10 and 12)
STOCKHOLDERS' EQUITY (Note 8):
Common stock, $.00001 par value; authorized
25,000,000 shares; issued and outstanding
11,342,277 shares 113
Additional paid-in capital 7,640,745
Accumulated deficit (4,438,639)
Foreign currency translation adjustment 5,372
-----------
TOTAL STOCKHOLDERS' EQUITY 3,207,591
-----------
$ 3,760,831
===========
</TABLE>
See notes to financial statements.
FF-2
<PAGE> 18
ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1996
<TABLE>
<S> <C>
SALES $ 514,513
COST OF SALES 414,633
------------
GROSS PROFIT 99,880
------------
OPERATING EXPENSES:
Selling, general & administrative expenses 687,558
Depreciation and amortization 296,082
------------
983,640
------------
OPERATING LOSS (883,760)
------------
OTHER EXPENSES (INCOME):
Interest 20,500
Foreign currency exchange rate changes (10,639)
------------
9,861
------------
NET LOSS $ (893,621)
============
NET LOSS PER SHARE $ (0.08)
============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING $ 10,552,716
============
</TABLE>
See notes to financial statements.
FF-3
<PAGE> 19
ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Common Stock Additional Foreign
---------------------- Paid-In Accumulated Currency
Shares Amount Capital Deficit Transaction
----------- ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance - July 1, 1995 9,787,377 $ 98 $5,951,750 $(3,545,018) $5,372
Issuance of common stock:
Cash 1,454,900 14 1,678,996 - -
Services 100,000 1 9,999 - -
Net Loss (893,621) -
----------- ---- ---------- ----------- ------
Balance - June 30, 1996 11,342,277 $113 $7,640,745 $(4,438,639) $5,372
=========== ==== ========== =========== ======
</TABLE>
See notes to financial statements.
FF-4
<PAGE> 20
ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (893,621)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 296,082
Other 882
Changes in assets and liabilities:
Accounts receivable (8,345)
Inventories 1,863
Prepaid expenses (409,920)
Accounts payable and accrued expenses 92,174
-----------
NET CASH USED IN OPERATING ACTIVITIES (920,885)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property and equipment (785,309)
-----------
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES:
Net proceeds from issuance of common stock 1,679,010
Increase in loans payable 120,303
-----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,799,313
-----------
EFFECT OF FOREIGN CURRENCY EXCHANGE
RATE CHANGES 10,639
-----------
NET INCREASE IN CASH 103,758
CASH - BEGINNING OF PERIOD 81,341
-----------
CASH - END OF PERIOD $ 185,099
===========
NON-CASH OPERATING ACTIVITIES:
Common stock issued for services $ 10,000
===========
</TABLE>
See notes to financial statements.
FF-5
<PAGE> 21
ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
Note 1 GOING CONCERN
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, the Company
has sustained substantial operating losses during the year ended June
30, 1996. In addition, at June 30, 1996 current liabilities exceeded
current assets by $328,000. These factors create uncertainty as to the
Company's ability to continue as a going concern. Management believes
that the Company will be able to raise additional capital through the
issuance of common stock and that its operations will improve through
increased sales volume and productivity. The ability of the Company to
continue as a going concern is dependent on obtaining capital from the
issuance of common stock and increasing sales volume and productivity.
The financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern.
Note 2 SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
The Company was incorporated in Delaware in 1972 as Aurre Management
Co., Inc. In 1982, the Company changed its name to "Fluid Lift
International, Inc." and ultimately ceased operations in 1988. On
January 23, 1995, the Company became Odessa Foods International, Inc.
and commenced operation of a meat processing facility through its
foreign subsidiary in Odessa, Ukraine.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts
of Odessa Foods International, Inc. (the "Company") and its wholly
owned subsidiary Odessa Foods, Inc. (incorporated in Delaware) and the
latter's majority owned subsidiary Hilmac GmbH, Odessa (a Ukraine
entity). All intercompany transactions and balances have been
eliminated in consolidation.
Basis of Accounting
The Company maintains its records on the accrual basis of accounting.
Revenues are recognized when the products are delivered and expenses
are recorded when incurred.
FF-6
<PAGE> 22
ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
Note 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventories
Inventories, consisting of meat and related food products, are stated
at the lower of cost (first-in, first-out method) or market.
Property and Equipment
Property and equipment are recorded at cost. Maintenance and repair
costs are charged to expense as incurred.
Depreciation and Amortization
Depreciation of property and equipment is provided for by the
straight-line method over the estimated useful lives of the respective
assets. Amortization of intangible assets is provided by the
straight-line method over ten years.
Expenses Related to Sales of Securities
All costs incurred in connection with sales of the Company's common
stock were charged to additional paid-in capital.
Loss Per Share
Net loss per common share is based upon the weighted average number of
shares of common stock outstanding during the weighted period.
Foreign Currency Translation
Hilmac GmbH, the Company's foreign subsidiary, is located in the
Ukraine, a country which has a highly inflationary economy.
Accordingly, the entity's financial statements were remeasured as if
the functional currency was the U.S. dollar. The remeasurement process
resulted in translation adjustments which are included in the results
of operations for the year ended June 30, 1996.
FF-7
<PAGE> 23
ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
Note 2 SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fiscal Year
The Company changed its fiscal year to December 31. Accordingly, the
next fiscal year will be the six months ended December 31, 1996.
Note 3 PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
Estimated
Useful Life Amount
----------- ----------
<S> <C> <C>
Production equipment - meat plant 10 years $2,169,877
Transportation equipment 5-8 years 157,466
Office equipment 5-10 years 17,586
Construction in-progress (a) 935,993
----------
3,280,922
Less: Accumulated depreciation 528,217
----------
$2,752,705
==========
</TABLE>
(a) Construction in-progress includes the cost of the pasta production
equipment and the cost of dismantling, reassembling and installing such
equipment in the leased premises located in Teplodar, Ukraine.
Depreciation will commence when the equipment is put into use.
Depreciation expense for the year ended June 30, 1996 was $260,082.
Note 4 INTANGIBLE ASSETS
Intangible assets consist of costs incurred prior to the commencement
of operations for incorporation fees, obtaining production and sales
rights, registration fees and governmental approvals and certificates.
Amortization expense for the year ended June 30, 1996 was $36,000.
Note 5 PREPAID LEASE COSTS
The Company is obligated under a lease agreement with an unaffiliated
landlord for the rental of an unfinished building through the year
2020. The Company has agreed to pay the costs of alterations and
improvements and upon completion the Company will
FF-8
<PAGE> 24
ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
Note 5 PREPAID LEASE COSTS (Continued)
commence deducting these costs from monthly rent charges until such
costs are fully recovered. The agreement provides for minimum monthly
lease payments of $66 plus two percent of gross sales. Prepaid lease
costs may only be offset against percentage rents. Minimum annual lease
payments excluding percentage rents are $792 through April 2020.
Note 6 NOTE PAYABLE - BANK
The note is unsecured and is payable on demand with interest at ten
percent per annum. At June 30, 1996 the financial statements included
accrued interest of $9,000 due to the bank.
Note 7 LOANS PAYABLE
Loans payable represents advances received from two members of the
Board of Directors. The loans include interest at eight percent per
annum which at June 30, 1996 amounted to $13,000.
Note 8 STOCK OPTION PLAN
In June 1996 the Company adopted a 1996 Non-Statutory Stock Option Plan
and reserved 1,000,000 shares for issuance to eligible employees,
officers, directors and consultants. Options are non-transferable and
are exercisable during a term of not more than ten years from the date
of grant. The options are issuable in such amounts and at such prices
as determined by the Board of Directors, except that the option price
of each grant will not be less than twenty percent of the market value
of such shares on the date the options are granted.
On June 13, 1996, options to purchase 100,000 shares were granted at an
exercise price of $.30 per share. At June 30, 1996 the options were
unexercised and expire on June 13, 2001.
FF-9
<PAGE> 25
ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
Note 9 INCOME TAXES
The Company has adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS No. 109") which requires the
recognition of a deferred tax asset resulting from the expected future
tax benefit to be derived from a tax loss carryforward. SFAS No. 109
additionally requires the establishment of a valuation allowance to
reflect the likelihood of realization of such deferred tax asset. At
June 30, 1996 the Company had a deferred tax asset of $720,000 arising
from an operating loss deduction. The Company has recorded a valuation
allowance for the full amount of such deferred tax asset. The Company's
tax loss carryforward expires primarily in the year 2011.
Note 10 COMMITMENT
The Company has an employment agreement with a key executive officer
which expires on December 15, 1997. In addition to a base salary the
agreement provides for a bonus based on net income, as defined, after
taxes. Compensation expense for the year ended June 30, 1996 was
$120,492.
Note 11 RELATED PARTY TRANSACTIONS
The Company received professional service from an accounting firm whose
principal is an officer and director of the Company. Fees for such
services were $26,000 in 1996. The Company incurred costs of $15,000 in
1996 for consulting services provided by a shareholder relating to the
construction of the pasta manufacturing facility. Accounts receivable
and accrued expenses include $40,500 due to the above persons. The
Company has incurred costs for services rendered by a shareholder in
connection with the sale of its securities. Fees for such services
amounted to $12,000 in 1996.
Note 12 LITIGATION
The Company's transfer agent, in a Complaint for Interpleader,
Declaratory Judgment and related relief commenced an action in the
United States District Court for the District of Utah, Central Division
under Index No. 96CV0194B, has tendered to the Court Company stock
certificates representing 133,824 of an aggregate of 341,050 shares in
dispute (and upon information and belief intends to tender any further
portion of such 341,050 shares as may come into its possession) in an
effort to seek Court determination as to true ownership and a Court
Order regarding issuance or cancellation of such certificates. The
FF10
<PAGE> 26
ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
Note 12 LITIGATION (Continued)
Company is a party defendant to this action, in which its transfer
agent seeks indemnification from the Company for any sums which may be
awarded against such transfer agent by reason of its compliance with
the Company's instructions to not remove restrictive legend(s) from the
certificates in question. Owing to the current early stages of the
litigation and further owing to the fact that discovery proceedings
have not even been scheduled as yet, it is virtually impossible to
determine, with any degree of certainty, the final outcome of this
litigation although the Company is of the opinion that such outcome
will not have a material adverse effect upon its financial position or
the results of its operations.
Note 13 SUBSEQUENT EVENTS
On September 11, 1996, the Company granted 60,000 options to purchase
up to 60,000 shares of the Company's common stock under the 1996
Non-Statutory Stock Option Plan with an exercise price of $.25 per
share.
As of September 16, 1996 all options issued to date remain unexercised
and expire five years from the date of grant.
FF11
<PAGE> 27
[BEDERSON AND COMPANY LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders of
Odessa Foods International, Inc.
Jersey City, New Jersey
We have audited the accompanying consolidated balance sheets of Odessa Foods
International, Inc., and its subsidiaries, as of June 30, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity (deficiency)
and cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the 1995 and 1994 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Odessa
Foods International, Inc., and its subsidiaries, at June 30, 1995 and 1994 and
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed, in Note 2 to
the consolidated financial statements, the Company's significant operating
losses and limited sources of financing raise substantial doubt about the
Company's ability to continue as a going-concern. Management's plans in regard
to these matters are discussed in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/S/ BEDERSON & COMPANY LLP
---------------------------
BEDERSON & COMPANY LLP
West Orange, New Jersey
October 9, 1995
F(1)
<PAGE> 28
ODESSA FOODS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 81,341 $ 9,064
Accounts receivable, net of allowance for
doubtful accounts of $1,879 and $1,378,
respectively 16,907 12,397
Inventory 18,284 3,580
Prepaid expenses and sundry receivables 7,692 30,731
----------- -----------
TOTAL CURRENT ASSETS 124,224 55,772
----------- -----------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $268,135 and $51,438,
respectively 2,227,478 2,006,093
----------- -----------
OTHER ASSET:
Start-up costs, net of amortization of
$45,000 and $9,000, respectively 315,000 351,000
Prepaid lease costs 86,263 --
----------- -----------
TOTAL OTHER ASSETS 401,263 351,000
----------- -----------
TOTAL ASSETS $ 2,752,965 $ 2,412,865
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable $ 214,263 $ 1,885
Note payable - bank 75,000 --
Loan payable - related party 50,000 --
Accrued expenses 1,500 --
----------- -----------
TOTAL CURRENT LIABILITIES 340,763 1,885
----------- -----------
LONG-TERM DEBT:
Due to stockholders -- 2,657,639
----------- -----------
MINORITY INTEREST -- 1,995
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common stock, $.00001 par value,
authorized 75,000,000 shares
issued and outstanding 9,787,377
shares (1995) and 9,515,477
shares (1994) 98 95
Additional paid-in capital 5,951,750 2,783,512
Accumulated deficit (3,545,018) (3,032,261)
Foreign currency translation 5,372 --
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) 2,412,202 (248,654)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIENCY) $ 2,752,965 $ 2,412,865
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F(2)
<PAGE> 29
ODESSA FOODS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
SALES $ 274,419 $ 141,158
COST OF SALES 237,188 151,784
----------- -----------
GROSS PROFIT (LOSS) 37,231 (10,626)
----------- -----------
OPERATING EXPENSES:
Officer salary 38,750 --
Legal and consulting 97,402 --
Marketing research and development -- 410,000
Depreciation and amortization 252,697 60,438
Other 163,134 32,931
----------- -----------
TOTAL OPERATING EXPENSES 551,983 503,369
----------- -----------
LOSS FROM CONTINUING OPERATIONS
BEFORE MINORITY INTEREST AND INCOME TAXES (514,752) (513,995)
MINORITY INTEREST IN NET LOSS OF
CONSOLIDATED SUBSIDIARY 1,995 852
INCOME TAXES -- --
----------- -----------
LOSS FROM CONTINUING OPERATIONS (512,757) (513,143)
DISCONTINUED OPERATIONS - loss from
discontinued operations, net of
income taxes of $-0- -- (11,649)
----------- -----------
NET LOSS $ (512,757) $ (524,792)
=========== ===========
LOSS PER COMMON SHARE:
Loss from continuing operations $ (.05) $ (.06)
Loss from discontinued operations -- --
----------- -----------
NET LOSS $ (.05) $ (.06)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 9,616,078 8,922,580
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F(3)
<PAGE> 30
ODESSA FOODS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
Common Stock
-------------------------- Additional
Number of Paid-in
Shares Amount Capital
------ ------ -------
<S> <C> <C> <C>
BALANCE - June 30, 1993, as previously reported 10,608,700 $ 106,087 $ 2,435,871
Adjustment for pooling of interests with Odessa Foods, Inc.
(a Delaware corporation) 8,500,000 85 229,915
Reverse stock split (including fractional shares) (10,451,919) (104,527) 104,527
----------- ----------- -----------
BALANCE, as restated - June 30, 1993 8,656,781 1,645 2,770,313
Year ended June 30, 1994:
Change in par value from $.01 to $.00001 per common share -- (1,558) 1,558
Issuance of common stock for services 858,696 8 576
Capital contribution - expenses paid on behalf of Company
by stockholder -- -- 11,065
Net loss for the year -- -- --
----------- ----------- -----------
BALANCE - June 30, 1994 9,515,477 95 2,783,512
Year ended June 30, 1995:
Capital contributions by stockholders representing loans -- -- 2,706,341
Issuance of common stock for cash 241,900 2 431,898
Issuance of common stock in accordance with
bank note agreement 30,000 1 29,999
Net loss for the year -- -- --
Foreign currency translation -- -- --
----------- ----------- -----------
BALANCE - June 30, 1995 9,787,377 $ 98 $ 5,951,750
=========== =========== ===========
<CAPTION>
Foreign
Accumulated Currency
Deficit Translation Total
------- ----------- -----
<S> <C> <C> <C>
BALANCE - June 30, 1993, as previously reported $(2,541,958) $ -- $ --
Adjustment for pooling of interests with Odessa Foods, Inc.
(a Delaware corporation) 34,489 -- 264,489
Reverse stock split (including fractional shares) -- -- --
----------- ----------- -----------
BALANCE, as restated - June 30, 1993 (2,507,469) -- 264,489
Year ended June 30, 1994:
Change in par value from $.01 to $.00001 per common share -- -- --
Issuance of common stock for services -- -- 584
Capital contribution - expenses paid on behalf of Company
by stockholder -- -- 11,065
Net loss for the year (524,792) -- (524,792)
----------- ----------- -----------
BALANCE - June 30, 1994 (3,032,261) -- (248,654)
Year ended June 30, 1995:
Capital contributions by stockholders representing loans -- -- 2,706,341
Issuance of common stock for cash -- -- 431,900
Issuance of common stock in accordance with
bank note agreement -- -- 30,000
Net loss for the year (512,757) -- (512,757)
Foreign currency translation -- 5,372 5,372
----------- ----------- -----------
BALANCE - June 30, 1995 $(3,545,018) $ 5,372 $ 2,412,202
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
F(4)
<PAGE> 31
ODESSA FOODS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (512,757) $ (524,792)
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation and amortization 252,697 60,438
Foreign currency translation 5,372 --
Operating expenses through
issuance of common stock 30,000 11,649
Provision for doubtful accounts 501 1,378
Minority interest (1,995) (852)
(Increase) decrease in operating
assets:
Accounts receivable (5,011) (13,775)
Inventory (14,704) (1,430)
Prepaid expenses and sundry
receivables (63,224) (1,086)
Increase (decrease) in operating
liabilities:
Accounts payable 212,378 1,885
Accrued expenses 1,500 --
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (95,243) (466,585)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (438,082) (721,388)
Start-up costs -- (360,000)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (438,082) (1,081,388)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings 75,000 --
Issuance of common stock for cash 431,900 --
Loans from stockholders 48,702 1,517,620
Loan from related party 50,000 --
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 605,602 1,517,620
----------- -----------
INCREASE (DECREASE) IN CASH 72,277 (30,353)
CASH - beginning 9,064 39,417
----------- -----------
CASH - ending $ 81,341 $ 9,064
=========== ===========
NON-CASH OPERATING ACTIVITIES:
Common stock issued in accordance with bank
note agreement $ 30,000 $ --
=========== ===========
NON-CASH FINANCING ACTIVITIES:
Stockholder loans transferred to
additional paid-in capital $ 2,706,341 $ --
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
F(5)
<PAGE> 32
ODESSA FOODS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was incorporated under the laws of the State of
Delaware on June 28, 1972 under the name "Aurre Management Co.,
Inc." On January 11, 1982, the Company changed its name to "Fluid
Lift International, Inc." The Company's business plans were
unsuccessful and in 1988 it ceased operations. On January 23,
1995, the Company changed its name to Odessa Foods International,
Inc. The Company presently manufactures sausages, pastas and
related food products in Odessa, Ukraine.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of Odessa Foods International, Inc. (Parent), and its
wholly owned subsidiary Odessa Foods, Inc. (incorporated in
Delaware) and the latter's majority owned subsidiary Hilmac GmbH,
Odessa (a Ukrainian corporation). All intercompany transactions
and balances have been eliminated in consolidation.
Business Combination and Restatement
On November 26, 1994, Odessa Foods, Inc. exchanged 300 shares of
common stock for all of the outstanding shares of F & L Food &
Leasure Marketing Ltd. (an Irish corporation) who owned a majority
interest in Hilmac GmbH, Odessa.
On November 26, 1994, Odessa Foods International, Inc. exchanged
8,500,000 shares of common stock for all of the outstanding shares
of Odessa Foods, Inc. subsequent to the above transaction.
The transactions have been accounted for as a pooling of interest
and accordingly, the consolidated financial statements for all
periods presented have been restated to include the accounts of
Odessa Foods International, Inc., Odessa Foods, Inc., F & L Food &
Leasure Marketing Ltd. and Hilmac GmbH, Odessa.
Basis of Accounting
The Company maintains its records on the accrual basis of
accounting. Revenues are recognized when the products are
delivered and expenses are recorded when incurred.
Inventory
Inventory, consisting of perishable meat and related products, is
stated at cost.
Property and Equipment
Property and equipment including significant betterments, are
recorded at cost. Upon retirement or disposal of properties, the
cost and accumulated depreciation are removed from the accounts,
and any gain or loss is included in income. Maintenance and repair
cost are charged to expense as incurred.
F(6)
<PAGE> 33
ODESSA FOODS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Depreciation
Depreciation of property and equipment is provided for over the
estimated useful lives of the respective assets. Depreciation is
recorded on the straight-line method. The estimated useful lives
of each asset category are as follows:
<TABLE>
<CAPTION>
Years
<S> <C>
Production equipment 10
Transportation equipment 5
Office equipment 5
</TABLE>
Start-Up Costs
Start-up costs consist of expenses and fees incurred prior to the
commencement of operations for incorporation fees, cost for
obtaining production and sales rights, registration fees and
governmental approvals and certificates. Amortization is provided
for over the estimated economic life of the assets. Amortization
is recorded based on the straight-line method over an estimated
economic life of ten (10) years.
Amortization expense for the years ended June 30, 1995 and 1994
were $36,000 and $9,000, respectively.
Expenses Related to Sales and Issuance of Securities
All costs incurred in connection with the sale of the Company's
common stock have been capitalized and charged to additional
paid-in capital.
Net Loss Per Common Share
Loss per common share is computed by dividing the net loss by the
weighted average number of shares of common stock outstanding
during the periods.
Foreign Currency Translation
Assets and liabilities of subsidiaries operating in foreign
countries are translated into U.S. dollars using the exchange rate
in effect at the balance sheet date. Results of operations are
translated using the average exchange rates prevailing throughout
the year. The effects of exchange rate fluctuations on translating
foreign currency assets and liabilities into U.S. dollars are
included in stockholders' equity, while gains and losses resulting
from foreign currency transactions are included in operations.
F(7)
<PAGE> 34
ODESSA FOODS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared in
conformity with generally accepted accounting principles, which
contemplates continuation of the Company as a going concern.
However, the Company has sustained substantial operating losses
for the years ended June 30, 1995 and 1994. In addition, at June
30, 1995 current liabilities exceed current assets by $216,539.
These factors create an uncertainty about the Company's ability to
continue as a going concern. Management believes that the Company
will be able to raise additional capital through the issuance of
common stock and its operations will improve through increased
sales volume and productivity. The ability of the Company to
continue as a going concern is dependent on obtaining capital from
the issuance of common stock and increasing sales volume and
productivity. The financial statements do not include any
adjustments that might be necessary if the Company is unable to
continue as a going concern.
NOTE 3 - PROPERTY AND EQUIPMENT
The components of property and equipment are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- -------
<S> <C> <C>
Production equipment $2,444,113 $2,057,531
Transportation equipment 45,000 -
Office equipment 6,500 -
---------- ----------
Total 2,495,613 2,057,531
Less: Accumulated depreciation 268,135 51,438
---------- ----------
$2,227,478 $2,006,093
========== ==========
</TABLE>
Depreciation expense for the years ended June 30, 1995 and 1994
were $216,697 and $51,438, respectively.
NOTE 4 - PREPAID LEASE COST
In April 1995, the Company entered into an operating lease
agreement for a term of twenty-five (25) years for the rental of
an unfinished building. In accordance with the agreement, the
Company will pay for the costs of alterations and improvements and
upon completion the Company will deduct these costs from the
monthly rent charge until all costs are recovered.Prepaid lease
costs at June 30, 1995 were $86,263.
F(8)
<PAGE> 35
ODESSA FOODS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 5 - NOTE PAYABLE - BANK
In May 1995, the Company entered into a ninety (90) day unsecured
note agreement with the Bank In Liechtenstein in the amount of
$100,000 at the interest rate of ten percent (10%) per annum. As
additional consideration for the note, the Company issued 30,000
shares of restricted common stock. The balance of the note at June
30, 1995 was $75,000.
NOTE 6 - LOANS PAYABLE - RELATED PARTY
In June 1995, a member of the Board of Directors advanced $50,000
to the Company. The loan is interest free for a term of sixty
days.
NOTE 7 - DUE TO STOCKHOLDERS
This balance represents non-interest bearings loans from
stockholders which were transferred to additional paid-in capital
on November 20, 1994.
NOTE 8 - MINORITY INTEREST
Minority interest represents a five percent (5%) interest in
Hilmac GmbH, Odessa, a subsidiary of Odessa Foods, Inc. At June
30, 1995 the minority interest in this subsidiary was reduced to
zero due to accumulated losses exceeding the capital contributions
of the minority shareholders.
NOTE 9 - INCOME TAXES
The Company adopted Statement of Financial Accounting Standard 109
("SFAS"). SFAS 109 provides for an asset and liability approach to
accounting for income taxes that require the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in the Company's
financial statements or tax returns.
In estimating future consequences, SFAS 109 generally considers
all expected future events other than proposed changes in the tax
law or rates prior to enactment.
For the years ended June 30, 1995 and 1994, there was no provision
for deferred federal, state or foreign income taxes because all
net operating loss carryforwards are no longer available due to
the change in ownership of the Company.
F(9)
<PAGE> 36
ODESSA FOODS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 9 - INCOME TAXES (Continued)
A reconciliation between the statutory federal income tax rate
(34%) and the effective income tax rates based on continuing
operations is as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Statutory federal income tax
(benefit) $(174,337) $(178,429)
State income tax - -
Foreign income tax - -
Benefit not recognized on
operating loss 174,337 178,429
--------- ---------
$ - $ -
========= =========
</TABLE>
NOTE 10 - COMMON STOCK
On November 20, 1994, the Company effectuated a 1 for 68 reverse
stock split to its then outstanding 69,000,000 shares of common
stock so that immediately subsequent thereto, the number of common
shares outstanding was 1,014,706 shares.
The accompanying financial statements reflect the retroactive
effect of the reverse stock split, where applicable.
On October 1, 1993, the Board of Directors approved the issuance
of 211,637 shares (14,391,300 pre split shares) to officers and
directors of the Company as compensation for services rendered.
On October 2, 1993, at a special meeting of the Company's
stockholders, the stockholders approved an increase in the
Company's authorized capital from 25,000,000 shares of $0.01 par
value common stock to 75,000,000 shares of $0.00001 par value
common stock. On May 23, 1994, the Company filed a Certificate of
Amendment reflecting the increase with the Secretary of State of
Delaware.
On October 5, 1993, the Board of Directors approved the issuance
of 735,294 shares (50,000,000 pre split shares) of common stock to
Gregory Aurre, President (since resigned), for services rendered.
The shares were later reduced to 647,059 shares (44,000,000 pre
split shares) and as such were issued after the filing of the
Certificate of Amendment.
In February of 1995, the Company issued 215,000 shares of common
stock for $405,000, net of $25,000 for commissions and fees.
In April 1995, the Company issued 26,900 shares of common stock
for $26,900.
F(10)
<PAGE> 37
ODESSA FOODS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND 1994
NOTE 11 - DISCONTINUED OPERATIONS
The Company discontinued its operations in the development and
sale of flexible tubing for oil and gas drilling in 1994. Loss
from discontinued operations for the year ended June 30, 1994
was $11,649, net of income taxes of $-0-.
NOTE 12 - GEOGRAPHIC AREAS
The Company presently derives all of it's revenues from it's
subsidiary located in the Ukraine. The Company is a manufacturer
of sausages, pastas and related food products.
NOTE 13 - COMMITMENT
The Company entered into a written employment agreement with the
Chairman of the Board of Directors of Odessa Foods, Inc. and
Chief Executive Officer of Hilmac, Odessa which agreements
commenced on December 15, 1994 and expires two years thereafter.
The agreement provides for a monthly salary of $7,500 ($90,000
annually) as well as an annual bonus of five percent (5%) of
Company consolidated income after taxes.
The Company entered into an operating lease agreement in April
of 1995 for the rental of a manufacturing facility in the
Ukraine for a term of twenty five (25) years. The lease
agreement provides for a base monthly rent payment of $66 per
month plus two percent (2%) of the gross sales. The Company is
presently renovating the facility and all costs incurred will be
used to offset monthly rent charges. Rent expense for the years
ended June 30, 1995 and 1994 were $6,851 and $-0-, respectively.
Minimum annual lease payments (excluding percentage of sales)
are as follows:
<TABLE>
<CAPTION>
Years Ended
June 30,
-----------
<S> <C>
1996 $ 792
1997 792
1998 792
1999 792
2000 792
Thereafter 15,642
</TABLE>
NOTE 14 - RELATED PARTY TRANSACTIONS
During 1994, a stockholder paid expenses of the Company from
personal funds which totaled $11,065. This amount was recorded
as additional paid-in capital.
F(11)
<PAGE> 38
ITEM 8. CHANGES IN THE AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No disagreements with accountants on accounting and financial
disclosure matters existed during the Company's fiscal year ended June 30, 1996.
Notwithstanding the above, the Registrant did change its auditing firm as
indicated in a Form 8-K with date of report of February 1, 1996 (at Item 4
thereof and Exhibits A and B thereto) as filed with the Securities and Exchange
Commission on March 8, 1996.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The Directors and Executive Officers of the Company, as of October 1,
1996, were as follows:
<TABLE>
<CAPTION>
Name and Address Position(s) Held Age
- ---------------- ---------------- ---
<S> <C> <C>
Leon Golden President and Director 34
135 Irwin Street
Brooklyn, NY 11235
Werner Heim Secretary-Treasurer and 63
Witikonerstrasse 311B a Director
CH-8053 Zurich
Switzerland
Max Hilpert Chairman of the Board 54
u1. Tschkalowa, 2-a of Directors
270012 Odessa
Ukraine
Alfons Anderhub Director 50
Luessirainstrasse 51
CH-6300 Zug
Switzerland
Urs Wettstein Director 41
Weinbergstrasse 43
CH-8802 Kilchberg
Switzerland
</TABLE>
16
<PAGE> 39
Certain officers and/or directors of the Company resigned from the
positions held by them during fiscal year 1996 as follows:
1. Kathleen Histon - former President and Director resigned October 9,
1995 and
2. Kathie Horne - former Secretary-Treasurer and Director resigned
October 9, 1995.
None of the above resignations were as a result of any disagreements
with the Company on any matter relating to its operations, policies or
practices.
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have qualified.
Officers are appointed to serve until the meeting of the Board of Directors
following the next annual meeting of stockholders and until their successors
have been elected and have qualified.
LEON GOLDEN has been President and a Director of the Company since November
1995. Mr. Golden has over ten years of experience in public finance and is
working for a public accounting firm in the United States. Mr. Golden for the
past few years has been specializing his financial experience in the food
industry. Additionally, Mr. Golden currently serves as Secretary-Treasurer and a
Director of Moonlight International Corp. (see biographical information with
respect to Werner Heim appearing directly below).
Securities owned of record and/or beneficially: -0- shares of Common Stock as of
October 1, 1996. On September 11, 1996 Mr. Golden was granted options to
purchase up to 30,000 shares of Company common stock exercisable at $.25 per
share in accordance with the Company's 1996 Non-Statutory Stock Option Plan .
Such options are non transferable, expire five years from date of issuance and
remain unexercised as of October 1, 1996.
WERNER HEIM has been a Director of the Company since November, 1994 and
Secretary-Treasurer since November 1995. Mr. Heim has approximately 30 years of
experience in international business development in high technology industries
with a background which includes participation within the following industries;
computer systems, biotechnology, microfiltration and environmental waste
processing. In addition to the positions that Mr. Heim currently holds with the
Company he currently serves as (a) President and Chairman of the Board of
Directors of Seiler Pollution Control Systems, Inc. ("SEPC"), an international
environmental service and equipment company and (b) President and director of
Moonlight International Corp. ("LYTE"), a firm engaged in the development and
commercialization of a line of unique helium- filled lighting balloons providing
shadow-free/non-dazzling luminosity with an extremely low energy consumption.
SEPC is currently publicly traded in the NASDAQ SmallCap Market under the stock
symbol SEPC while LYTE is currently trading on the Electronic Over-the-Counter
Bulletin Board under the stock symbol LYTE.
Securities owned of record and/or beneficially: -0- shares of Common Stock as of
October 1, 1996.
17
<PAGE> 40
MAX HILPERT has been Chairman of the Board of Directors of the Company since
November 1994. Mr. Hilpert had been President of the Company from October 1995
until his resignation from such position in November 1995. Mr. Hilpert served as
credit and loan manager for a major portfolio management bank located in Zurich,
Switzerland until 1978 at which time he left such firm in order to establish his
own portfolio and finance consulting company. Thereafter and in 1992 Mr. Hilpert
left Switzerland in order to establish and organize on behalf of the Company a
meat and sausage production facility and business in Odessa, Ukraine. Mr.
Hilpert is the co-founder of both Odessa Foods, Inc. (formerly F&L Food &
Leisure Marketing Ltd.) and Hilmac GmbH Odessa, Company subsidiaries.
Securities owned of record and/or beneficially: beneficial owner of 450,000
shares of Common Stock as of October 1, 1996.
URS WETTSTEIN has been a Director of the Company since November 1994 and had
been Secretary-Treasurer of the Company from November, 1994 until his
resignation in November 1995. Mr. Wettstein was employed by Coopers & Lybrand
until 1983 at which time he established his own consulting firm. Mr. Wettstein,
in conjunction with Mr. Hilpert, co-founded both Odessa Foods, Inc. and Hilmac
GmbH Odessa.
Securities owned of record and/or beneficially: -0- shares of Common Stock as of
October 1, 1996.
ALFONS ANDERHUB has been a Director of the Company since November, 1994. Mr.
Anderhub has approximately 25 years of experience in construction and consulting
of private and industrial projects having developed various multi million dollar
projects in Switzerland.
Securities owned of record and/or beneficially: record and beneficial owner of
300,000 shares of Common Stock as of October 1, 1996.
18
<PAGE> 41
ITEM 10. EXECUTIVE COMPENSATION
Remuneration paid (and/or accrued, if applicable and so specifically
indicated) to current officers and/or directors of the Company during fiscal
year ended June 30, 1996 is indicated in the chart appearing directly
hereinafter.
<TABLE>
<CAPTION>
Securities
Salaries, Fees, or Property, Aggregate of
Capacities Directors' Fees, Insurance Benefits Contingent
Name of In Which Commissions or Reimbursement, Forms of
Individual Served and Bonuses Personal Benefits Remuneration
- ---------- ------ ----------- ----------------- ------------
<S> <C> <C> <C> <C>
Leon Golden President and a $ 17,500 (2) -0-
Director
Werner Heim Secretary-Treasurer $ -0- -0- -0-
and a Director
Max Hilpert (1) Chairman of the $117,000 $23,000 -0-
Board Directors
Urs Wettstein (1) Director $ 26,000 -0- -0-
Alfons Anderhub Director $ 15,000 -0- -0-
</TABLE>
(1) Messrs. Hilpert (formerly Company President) and Wettstein (formerly
Company Secretary-Treasurer) while remaining actively involved with the
Company as directors, resigned from their respective positions as
officers in the Company on or about November 19, 1995 as reported in a
Form 8-K as filed with the Securities and Exchange Commission on
November 29, 1995.
(2) In September 1996 Mr. Golden was granted options to purchase up to
30,000 shares of Company common stock exercisable at $.25 per share.
See also Item 9 hereof.
During fiscal year ended June 30, 1996 certain former officers and/or
directors of the Company, since resigned from all positions held (see Part III,
Item 9, footnotes 1 and 2 thereof) received compensation from the Company as
follows:
<TABLE>
<CAPTION>
Securities
Capacities Salaries, Fees, or Property, Aggregate of
In Which Directors' Fees, Insurance Benefits Contingent
Name of Formerly Commissions or Reimbursement, Forms of
Individual Served and Bonuses Personal Benefits Remuneration
- ---------- ------ ----------- ----------------- ------------
<S> <C> <C> <C> <C>
Kathleen Histon * President and Director $ -0- -0- -0-
Kathie Horne * Secretary-Treasurer and $ -0- -0- -0-
a Director
</TABLE>
* Ms. Histon and Ms. Horne resigned from all positions held with the
Company on October 9, 1995 as reported in a Form 8-K as filed with the
Securities and Exchange Commission on November 29, 1995.
19
<PAGE> 42
There are no current written employment agreements between the Company
and any of its officers and directors excepting as follows:
The Company entered into a written employment agreement with Max
Hilpert, its former President and currently Chairman of the Board of Directors,
which Agreement commenced on December 15, 1994, expires December 15, 1997 and
provides for an annual salary of $97,500 as well as a annual bonus of five
percent (5%) of Company net consolidated profit after taxes. The Agreement
further provides, as follows; (a) payment of an additional $1,500 per month in
local Odessa currency, (b) free housing in Odessa, (c) contribution towards
Swiss State pension plan of $5,000 per annum, (d) contribution to medical-health
insurance in the sum of $8,000 per annum, (e) the annual sum of $10,000 for
travel expenses and (f) the use of a Company automobile.
No compensation of any nature was paid to any director for services
rendered to the Company in such capacity excepting as indicated herein or for
repayment made, if any, for accountable expenses incurred on the Company's
behalf.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners - The following
persons and/or firms are known to the Company to be the beneficial owners of
more than 5% of the 11,471,077 shares of the Company's outstanding $.00001 par
value Common Stock as of October 1, 1996. To the best of the Company's knowledge
each individual and/or firm has beneficial ownership of the shares and each
individual and/or firm has sole voting power and sole investment power with
respect to the number of shares beneficially owned.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- --------------------- ---------------------- --------
<S> <C> <C>
Berkshire International 950,000 8.28%
Finance, Inc.
551 Fifth Avenue- Suite 605
New York, New York 10017
Rolcan Finance Ltd. 588,800 5.13%
c/o Akar Verwaltungs AG
Seestrasse 17, P.O. Box 53
Zollikon 2, Switzerland
Histon Financial 846,887 7.38%
Services Ltd. (1)
One Evertrust Plaza
Jersey City, NJ 07302
</TABLE>
(1) Includes 10,000 shares owned of record and beneficially by Ms. Histon
in her own name.
20
<PAGE> 43
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- ------------------- -------------------- --------
Swiss Volksbank 1,200,000 (2) 10.46%
(2) Upon information and belief the number of shares indicated as being
owned of record and beneficially by Swiss Volksbank includes an
indeterminate number of shares owned in its trading account (record and
beneficial) as well as Company shares held by it as record holder for
beneficial interest of certain of its clientele.
(b) Security Ownership of Management - The number and percentage of
shares of $.00001 par value Common Stock of the Company owned of record and
beneficially, by each current officer and director of the Company and by all
current officers and directors of the Company as a group, is as follows - as of
October 1, 1996. To the best of the Company's knowledge each individual has
beneficial ownership of the shares and each individual has sole voting power and
sole investment power with respect to the number of shares beneficially owned.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- ------------------- ------------------------ --------
<S> <C> <C>
Leon Golden -0- (1) -0-%
135 Irwin Street
Brooklyn, New York 11235
Werner Heim -0- -0-%
Witikonerstrasse 311B
CH-8053 Zurich
Switzerland
Max Hilpert 450,000 (2) 3.92%
u1. Tschkalowa, 2-a
270012 Odessa
Ukraine
Urs Wettstein -0- -0-%
Weinbergstrasse 43
CH-8802 Kilchberg
Switzerland
Alphons Anderhub 300,000 (3) 2.62%
Luessirainstrasse 51
CH-6300 Zug
Switzerland
</TABLE>
(1) Does not include 30,000 options issued on September 11, 1996 pursuant
to 1996 Non-Statutory Stock Option Plan whereby Mr. Golden has the
right to purchase (for a period of 5 years from the date of grant) up
to 30,000 shares of Company common stock at $.25 per share.
(2) Owned beneficially only.
(3) Owned of record and beneficially.
21
<PAGE> 44
(c) Security Ownership of Former Management - The number and percentage
of shares of $.00001 par value Common Stock of the Company owned of record and
beneficially, by each former officer and director of the Company (who served as
an officer and/or director during fiscal year ended June 30, 1996 but no longer
serves as an officer and/or director of the Company as heretofore indicated in
Part III, Item 9) is as follows as of October 1, 1996. To the best of the
Company's knowledge each individual has beneficial ownership of the shares and
each individual has sole voting power and sole investment power with respect to
the number of shares beneficially owned.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- ------------------- -------------------- --------
<S> <C> <C>
Kathleen Histon 846,887 (1) 7.38%
30 Beech Hill Road
Scarsdale, NY 10883
Kathie Horne 10,000 .0008%
c/o Berkshire International
Finance, Inc.
551 Fifth Avenue - Suite 605
New York, NY 10017
</TABLE>
(1) Includes 836,887 shares owned by a corporation over which Ms. Histon has
control.
The Company does not know of any arrangement or pledge of its
securities by persons now considered in control of the Company that might result
in a change of control.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For the fiscal year ended June 30, 1996 there have not been any
material transactions between the Company and any director, executive officer,
security holder or any member of the immediate family of any of the
aforementioned which exceeded $60,000 other than as may be indicated in this
Form 10-KSB.
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
Reference is herewith made to page FF-1 through FF-11 and pages F-1
through F-11 inclusive of this 10-KSB with respect to the financial statements
and notes thereto included therein.
No exhibits are being filed with this Form 10-KSB.
During the last quarter of the Company's fiscal year ended June 30,
1996 no Form 8-K was filed. However, during the following quarter the Company
filed a Form 8-K with the Securities and Exchange Commission on July 29, 1996
with date of report of June 18, 1996, which Form 8-K indicated (at Item 5 -
Other Events thereto) that the Board of Directors of the Company at a meeting
held June 18, 1996 resolved that immediately subsequent to the close of the
Company's fiscal year ended June 30, 1996 that its year end be changed to
December 31, 1996 (thereby giving the Company a "short" six month year).
22
<PAGE> 45
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Odessa Foods International, Inc.
By /Leon Golden/
--------------------------
Leon Golden, President
Date: October 11, 1996
In accordance with the Exchange act, This report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
<TABLE>
<S> <C> <C>
/Leon Golden/ President and Dated: Oct. 11, 1996
- --------------------------- a Director
Leon Golden
/Werner Heim/ Secretary-Treasurer Dated: Oct. 4, 1996
- --------------------------- and a Director
Werner Heim
/Max Hilpert/ Chairman of the Dated: Oct. 8, 1996
- ---------------------------- Board of Directors
Max Hilpert
/Alfons Anderhub/ Director Dated: Oct. 3, 1996
- ----------------------------
Alfons Anderhub
/Urs Wettstein/ Director Dated: Oct. 7, 1996
- ----------------------------
Urs Wettstein
</TABLE>
23
<PAGE> 46
SUPPLEMENTAL INFORMATION
Supplemental Information to be Furnished With Reports Filed Pursuant to
Section 15(d) of the Act by Registrants Which Have Not Registered Securities
Pursuant to Section 12 of the Act.
The Company's fiscal year ended June 30, 1996. While the Company does
currently intend to hold an annual meeting of stockholders for its fiscal year
ended June 30, 1996 it has not, as yet, formalized any specific plans as to any
proposed date for such meeting.
Four copies of all material to be mailed to stockholders with respect
to such Annual Meeting of Stockholders (when scheduled to be held) will be
furnished to the Securities and Exchange Commission but such documents, when
furnished, will not be deemed to be "filed" with the Securities and Exchange
Commission or otherwise subject to liabilities of Section 18 of the Act (except
to the extent that the Registrant specifically incorporates such material by
reference in any subsequent Form 10-KSB); it is expected that such documents
will consist of a Form of Proxy, Notice of Annual Meeting with Information
Statement as well as such schedules and/or exhibits as may be annexed thereto.
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET STATEMENT OF OPERATIONS AND STATEMENT OF STOCKHOLDER EQUITY (DEFICIENCY)
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10K-SB
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 81,341
<SECURITIES> 0
<RECEIVABLES> 18,786
<ALLOWANCES> 1,879
<INVENTORY> 18,284
<CURRENT-ASSETS> 124,224
<PP&E> 2,495,613
<DEPRECIATION> 268,135
<TOTAL-ASSETS> 2,752,965
<CURRENT-LIABILITIES> 340,763
<BONDS> 0
0
0
<COMMON> 98
<OTHER-SE> 2,412,104
<TOTAL-LIABILITY-AND-EQUITY> 2,752,965
<SALES> 274,419
<TOTAL-REVENUES> 274,419
<CGS> 237,188
<TOTAL-COSTS> 237,188
<OTHER-EXPENSES> 551,983
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (514,752)
<INCOME-TAX> 0
<INCOME-CONTINUING> (512,757)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (512,757)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 185,099
<SECURITIES> 0
<RECEIVABLES> 27,131
<ALLOWANCES> 3,400
<INVENTORY> 16,421
<CURRENT-ASSETS> 225,251
<PP&E> 3,280,922
<DEPRECIATION> 528,217
<TOTAL-ASSETS> 3,760,831
<CURRENT-LIABILITIES> 553,240
<BONDS> 0
0
0
<COMMON> 113
<OTHER-SE> 3,207,478
<TOTAL-LIABILITY-AND-EQUITY> 3,760,831
<SALES> 514,513
<TOTAL-REVENUES> 514,513
<CGS> 414,633
<TOTAL-COSTS> 414,633
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,521
<INTEREST-EXPENSE> 20,500
<INCOME-PRETAX> (893,621)
<INCOME-TAX> 0
<INCOME-CONTINUING> (893,621)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (893,621)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
