<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[xx] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from___________________to_____________________
Commission File Number: 0-12775
Odessa Foods International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 75-1613360
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Mailing Address; 135 Irwin Street, Brooklyn, New York 11235
One Evertrust Plaza, Jersey City, New Jersey 07302
(Address of principal executive offices) (Zip Code)
(718) 646-4175
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [x] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
The number of shares outstanding of each of the registrant's classes of common
stock, as of November 20, 1996 is 11,471,077 shares, all of one class of $.00001
par value common stock.
1
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TABLE OF CONTENTS
Page No.
--------
PART I
Item 1. Financial Statements F1-F4
Item 2. Management's Discussion and Analysis 3-4
PART II
Item 1. Legal Proceedings 5
Item 2. Changes in Securities 5
Item 3. Defaults Upon Senior Securities 5
Item 4. Submission of Matters to a
Vote of Security Holders 5
Item 5. Other Information 5
Item 6. Exhibits and Reports on Form 8-K 5
Signatures 6
2
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ODESSA FOODS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash $ 172,803
Accounts receivable, less allowance for doubtful
accounts of $3,400 20,742
Inventory 15,643
Prepaid expenses and sundry receivables 1,445
-----------
TOTAL CURRENT ASSETS 210,633
-----------
PROPERTY AND EQUIPMENT, less accumulated
depreciation of $593,238 3,030,989
-----------
OTHER ASSETS:
Start-up costs, less amortization of $90,000 270,000
Prepaid lease costs 588,412
-----------
TOTAL OTHER ASSETS 858,412
-----------
$ 4,100,034
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 538,372
Note payable - bank 75,000
Loans payable - officers 223,705
-----------
TOTAL CURRENT LIABILITIES $ 837,077
-----------
STOCKHOLDERS' EQUITY:
Common stock, $.00001 par value; authorized
25,000,000 shares; issued and outstanding
11,542,277 shares 115
Additional paid-in capital 7,890,743
Accumulated deficit (4,633,273)
Foreign currency translation adjustment 5,372
-----------
TOTAL STOCKHOLDERS' EQUITY 3,262,957
-----------
$ 4,100,034
===========
</TABLE>
See notes to financial statements.
F-1
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ODESSA FOODS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1995
------------ ------------
<S> <C> <C>
SALES $ 162,802 $ 138,446
COST OF SALES 124,475 116,911
------------ ------------
GROSS PROFIT 38,327 21,535
------------ ------------
OPERATING EXPENSES:
Selling, general and administrative expenses 158,940 140,575
Depreciation and amortization 74,021 66,539
------------ ------------
232,961 207,114
------------ ------------
NET LOSS $ (194,634) $ (185,579)
============ ============
NET LOSS PER SHARE $ (.02) $ (.02)
============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 11,398,799 10,287,377
============ ============
</TABLE>
See notes to financial statements.
F-2
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ODESSA FOODS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(194,634) $(185,579)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 74,021 66,539
Changes in assets and liabilities:
Accounts receivable 2,989 (1,854)
Inventory 778 9,899
Prepaid expenses and sundry receivables (85,982) (128,701)
Accounts payable 230,435 (52,384)
--------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 27,607 (292,080)
--------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property and equipment (343,305) (531,492)
--------- ---------
CASH FLOWS PROVIDED BY FINANCING
ACTIVITIES:
Proceeds from sale of common stock 250,000 750,000
Loans from officers 53,402 42,171
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 303,402 792,171
--------- ---------
DECREASE IN CASH (12,296) (31,401)
CASH - BEGINNING OF PERIOD 185,099 81,341
--------- ---------
CASH - END OF PERIOD $ 172,803 $ 49,940
========= =========
</TABLE>
See notes to financial statements.
F3
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ODESSA FOODS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying financial statements reflect all adjustments which,
in the opinion of management, are necessary for a fair presentation of the
financial position and the results of operations for the interim periods
presented. All such adjustments are of a normal and recurring nature. The
results of operations for any interim period are not necessarily
indicative of a full year.
Certain financial information which is normally included in the
financial statements prepared in accordance with generally accepted
accounting principles, which is not required for interim reporting
purposes, has been condensed or omitted. The accompanying financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's annual report on
Form 10-KSB for the year ended June 30, 1996.
2. LITIGATION
The Company is a party/defendant to an action in which its transfer
agent seeks indemnification for any sums which may be awarded against such
transfer agent by reason of its compliance with the Company's instructions
not to remove restrictive legends from certain stock certificates. The
Company is of the opinion that the final outcome of such litigation will
not have a material adverse effect on its financial position or the
results of its operations.
F-4
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
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 for the three month period ended September 30, 1996 and should be
read in conjunction with the unaudited consolidated financial statements and
notes thereto included herein.
As heretofore indicated in the Registrant's Form 10-KSB for fiscal year
ended June 30, 1996, 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).
Consolidated Statement of Operations:
Comparative three month periods ended September 30, 1996 and September 30,
1995.
Sales for the three month period ended September 30, 1996 were $162,802 as
compared to sales of $138,446 for three month period ended September 30, 1995,
while cost of sales increased from the comparative three month period ended
September 30, 1995 from $116,911 to $124,475 resulting in a gross profit for
three month period ended September 30, 1996 of $38,327 as compared to $21,535
for the three month period ended September 30, 1995. Operating expenses
increased by $25,847 (from $207,114 to $232,961 during the comparative periods).
As a result of the above, the net loss for three month period ended September
30, 1996, i.e. $(194,634) was $9,055 greater than the $(185,579) net loss of the
comparative quarter.
Consolidated Balance Sheets:
Total assets of the Company at quarter ended September 30, 1996 were
$4,100,034. Total current assets (primarily cash) amounted to $210,633 while
total current liabilities amounted to $837,077 thereby creating a working
capital deficiency of $626,444. Approximately 27% of such current liabilities is
directly attributable to loans payable - officers of $223,705. The loans payable
referred to herein relate to advances received from two members of the Company's
Board of Directors.
At September 30, 1996 there were no long term liabilities.
As at September 30, 1996 the Company's accumulated deficit amounted to
$(4,633,273) while total stockholders' equity amounted to $3,262,957.
3
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Cash Requirements and Liquidity
The Company has been able to satisfy its cash requirements and raise the
necessary capital in order to finance its proposed growth through the sale and
issuance of 1,454,970 shares of its common stock during fiscal year ended June
30, 1996 for a cash consideration of $1,679,010 and has most recently (during
quarter ended September 30, 1996) sold an additional 200,000 shares for a cash
consideration of $250,000. The shares of Company common stock referred to herein
were sold in accordance with certain terms and conditions contained in Off-
Shores Securities Subscription Agreements and, accordingly, were sold outside
the U.S., not as a registered public offering but rather in reliance upon
Regulation S of the General Rules and Regulations under the Securities Act of
1933. A significant portion of the funds raised through sale of such common
shares have been utilized for the purchase of property and equipment and for
prepaid lease costs.
The consolidated financial statements to the Company's Form 10-KSB for
fiscal year ended June 30, 1996 indicated (in Note 1 thereto) certain factors
which created 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 its current liabilities exceed its current assets. Such operating
losses have continued during quarter ended September 30, 1996. Notwithstanding
the concerns expressed and the loss most recently incurred for quarter ended
September 30, 1996, Company management nevertheless continues to believe that
the Company will be able to continue its operations through (a) the raising of
additional capital through either debt or equity financing if necessary and/or
(b) the belief that its operations (through utilization of equipment recently
purchased and establishment of new and larger facilities) will improve
sufficiently through increased sales volume and productivity. As aforesaid,
working capital has been augmented by the infusion to date of $223,705 in loans
as advances made to the Company by two of its Board members in order to enable
the Company to actively pursue its business purposes.
The Company does not anticipate any significant changes in the number of
its employees and there are no current formal plans with regard to hiring of any
significant number of additional employees.
4
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PART II
Item 1. Legal Proceedings - (1)
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a
Vote of Security Holders - None
Item 5. Other Information - None
Item 6. (a) Exhibits - None
(b) Reports on Form 8-K - (2)
(1) None except as reported in Note 2 to the consolidated financial statements
of this Form 10-QSB and as previously reported in more expanded fashion,
in Item 3 to the Company's Form 10-KSB for fiscal year ended June 30, 1996
as well as in Note 12 to the notes to consolidated financial statements of
such Form 10-KSB.
(2) During the quarter ended September 30, 1996 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).
5
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ODESSA FOODS INTERNATIONAL, INC.
By /s/ Leon Golden
--------------------------------
Leon Golden, President
Dated: November 22, 1996
6
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 172803
<SECURITIES> 0
<RECEIVABLES> 24142
<ALLOWANCES> 3400
<INVENTORY> 15643
<CURRENT-ASSETS> 210633
<PP&E> 3624227
<DEPRECIATION> 593238
<TOTAL-ASSETS> 4100034
<CURRENT-LIABILITIES> 837077
<BONDS> 0
115
0
<COMMON> 0
<OTHER-SE> 3262842
<TOTAL-LIABILITY-AND-EQUITY> 4100034
<SALES> 162802
<TOTAL-REVENUES> 162802
<CGS> 124475
<TOTAL-COSTS> 124475
<OTHER-EXPENSES> 232961
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (194634)
<INCOME-TAX> 0
<INCOME-CONTINUING> (194634)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (194634)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
