<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 March 31, 1997
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.)
c/o M. Walter Levine, 1 River Road, Cos Cob, Connecticut 06807
(Address of principal executive offices) (Zip Code)
(203) 869-8033
(Registrant's telephone number, including area code)
Mailing Address; 135 Irwin Street, Brooklyn, New York 11235
One Evertrust Plaza, Jersey City, New Jersey 07302
(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 May 12, 1997 is 13,716,810 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 3-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations and Plan of
Operations 8-9
PART II
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a
Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
2
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ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
(Unaudited)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 715,675
Accounts receivable, less allowance for
doubtful accounts of $3,200 22,661
Inventories 6,344
Prepaid expenses 1,700
-----------
TOTAL CURRENT ASSETS 746,380
-----------
PROPERTY AND EQUIPMENT, at cost, less
accumulated depreciation of $848,078 3,264,407
-----------
OTHER ASSETS:
Intangible asset, less amortization of $108,000 252,000
Prepaid lease costs 704,781
-----------
TOTAL OTHER ASSETS 956,781
-----------
$ 4,967,568
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 241,015
Note payable - bank 75,000
Loans payable 488,325
Current maturities of note payable - officer 100,000
-----------
TOTAL CURRENT LIABILITIES 904,340
-----------
NOTE PAYABLE - OFFICER 100,000
-----------
STOCKHOLDERS' EQUITY:
Common stock, $.00001 par value, authorized
25,000,000 shares; issued and outstanding
13,716,810 shares 137
Additional paid-in capital 9,166,511
Foreign currency translation adjustment 4,701
Accumulated deficit (5,208,121)
-----------
TOTAL STOCKHOLDERS' EQUITY 3,963,228
-----------
$ 4,967,568
===========
</TABLE>
See notes to financial statements
3
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ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
SALES $ 128,988 $ 141,978
COST OF SALES 116,485 109,749
----------- -----------
GROSS PROFIT 12,503 32,229
----------- -----------
OPERATING EXPENSES:
Selling, general and administrative expenses 122,432 141,189
Depreciation and amortization 75,835 68,000
----------- -----------
198,267 209,189
----------- -----------
OPERATING LOSS (185,764) (176,960)
----------- -----------
OTHER EXPENSES (INCOME):
Interest 14,841 --
Foreign currency exchange rate changes (18,285) --
----------- -----------
(3,444) --
----------- -----------
NET LOSS $ (182,320) $ (176,960)
=========== ===========
NET LOSS PER SHARE $ (.02) $ (.02)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 11,845,699 10,724,229
=========== ===========
</TABLE>
See notes to financial statements
4
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ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1997 1996
---- ----
<S> <C> <C>
CASH FROM OPERATING ACTIVITIES:
Net loss $ (182,320) $(176,960)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 75,835 68,000
Sundry other items -- 534
Changes in assets and liabilities:
Accounts receivable 4,797 (5,123)
Inventories 8,881 (16,699)
Prepaid expenses and sundry receivables -- (55,669)
Accounts payable and accrued expenses (231,322) 22,891
---------- ---------
NET CASH USED IN OPERATING ACTIVITIES (324,129) (163,026)
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (170,197) (24,643)
---------- ---------
NET CASH USED IN INVESTING ACTIVITIES (170,197) (24,643)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 1,086,250 150,159
Advances from stockholders 105,666 50,000
---------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,191,916 200,159
---------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 4,701 --
---------- ---------
INCREASE IN CASH 702,291 12,490
CASH - BEGINNING OF PERIOD 13,384 104,350
---------- ---------
CASH - END OF PERIOD $ 715,675 $ 116,840
========== =========
</TABLE>
See notes to financial statements
5
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ODESSA FOODS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Odessa
Foods International, Inc. (the "Company") as of March 31, 1997 and for the three
month periods ended March 31, 1997 and 1996 have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
Certain information and footnote disclosures required under generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission, although the Company
believes that the disclosures are adequate to make the information presented not
misleading. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. The results of operations for any interim period are not necessarily
indicative of a full year.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. BUSINESS
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 and most recently (as hereinafter indicated) in
Teplodar, near Odessa. Its present facilities have been, and remain, in the
process of being expanded into a fully integrated food production plant. Most
recently, in March, 1997, a new facility became operational with meat and
sausage production supplemented by modern slaughter houses (new plant and
machinery having recently been purchased in Switzerland so as to encompass to
operations). The smaller of such facilities is expected to be operational during
1997 with a slaughter house capacity of 200 head per day. The larger facility
has been fully disassembled for shipment and has arrived in Teplodar, near
Odessa, for reassembly and is expected to be operational in early 1998 after the
building for production has been erected. The land for such new building for
production has been provided to the Company by Odessa governmental authorities
without charge or cost. 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 1,000 to 2,000 pigs and 400 to 500 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.
3. FINANCIAL CONDITION AND OPERATING RESULTS
Net sales for the three months ended March 31, 1997 were $128,988, a
decrease of $12,990 or 9.15% from $141,978 in the comparable 1996 quarter.
The Company had net loss of $182,320, or $.02 per share, for the three
months ended March 31, 1997 compared to net loss of $176,960, or $.02 per share,
for the comparable quarter in 1996.
6
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4. SALE OF COMMON STOCK
(a) On March 7, 1997 the Company issued 160,000 shares of common stock
for the conversion of $100,000 of the Company's debt.
(b) On March 20, 1997 the Company sold 2,000,000 shares of common stock
for an aggregate of $986,250 net of related expenses.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS AND PLAN OF OPERATIONS
Odessa Foods International, Inc. (the "Company") 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 Company for the three month period ended March 31, 1997 and the comparative
three month period ended March 31, 1996 and should be read in conjunction with
the unaudited consolidated financial statements and notes thereto included
herein.
As heretofore indicated in the Company's Form 10-KSB for calendar year
ended December 31, 1996, the Company acquired its wholly owned subsidiary,
Odessa Foods, Inc., in November of 1994, in a transaction accounted for using
the pooling of interest method of accounting.
Consolidated Statements of Operations:
Comparative three month periods ended March 31, 1996 and March 31,
1997.
Net loss for the three months ended March 31, 1997 was $182,320
compared to a net loss of $176,960 for the three months ended March 31, 1996.
Gross profit decreased by $19,726 in 1997 as compared to 1996 as a result of
lower sales and higher cost of sales percentages. Operating expenses decreased
for the comparative three month period indicated as a result of selling, general
and administrative expenses decreasing by $18,757, while depreciation and
amortization increased by $7,835. In addition, the Company incurred interest
expense for the three month period ended March 31, 1997 of $14,841 which was
offset by a gain in foreign currency of $18,285 (both were zero for the three
months ended March 31, 1996).
Consolidated Balance Sheet:
Total assets of the Company at March 31, 1997 and December 31, 1996
were $4,967,568 and $4,184,593 respectively, an increase of $782,975. Such
increase is primarily attributable to an increase in (a) current assets of
$688,613 (as a result of increases in cash of $702,291, primarily resulting from
the sale of 2,000,000 shares of common stock), (b) property and equipment of
$45,160 (after taking into account accumulated depreciation) and (c) other
assets of $49,202 (i.e. increase in prepaid lease costs of $58,202 offset by
amortization of start up costs of $9,000).
Current liabilities of the Company at March 31, 1997 and December 31,
1996 were $904,340 and $1,029,996 respectively. The decrease in total current
liabilities of $125,656 is primarily attributable to the fact that while
accounts payable and accrued expenses decreased by $231,322, loan(s)
payable - officers increased by $105,666.
8
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Stockholders' equity increased by $808,631 from $3,054,597 at December
31, 1996 to $3,963,228 at March 31, 1997. This increase primarily resulted from
the Company's sale of 2,160,000 shares of its common stock during such three
month period for an aggregate of $1,086,250 (net of related expenses) minus the
net loss of $182,320 sustained for the three months ended March 31, 1997.
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 1,454,900 shares of its common stock during fiscal year ended
June 30, 1996 for a cash consideration of $1,679,010 and has recently (during
subsequent six month period ended December 31, 1996) sold an additional 200,000
shares for a cash consideration of $335,000. 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. An additional 114,533 shares of common
stock were issued during such period in exchange for goods and services valued
at $104,540.
Since the close of its December 31, 1996 calendar year the Company has
issued certain additional shares either for (a) conversion of debt into equity
or (b) sale of shares of common stock. With respect to debt converted into
equity, the Registrant issued an aggregate of 160,000 shares in exchange for
cancellation of indebtedness totaling $100,000. Such shares were issued on or
about March 7, 1997. Additionally, and in accordance with Regulation D under the
Securities Act of 1933 the Registrant issued 2,000,000 shares of its common
stock for gross cash consideration of $1,000,000 with said shares being issued
on or about March 25, 1997.
Notwithstanding the working capital deficit heretofore referred to and
the fact that the consolidated financial statements to the Company's Form 10-KSB
for calendar year ended December 31, 1996 indicated (in Note 1 thereto) certain
factors which created an uncertainty about the Company's ability to continue as
a going concern and further notwithstanding the loss most recently incurred of
$(182,320) for the quarter ended March 31, 1997, 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 when, as and if necessary and/or (b) its belief that its operations
will eventually improve sufficiently through utilization of property and
equipment recently purchased so as to enable the Company to increase
productivity and obtain profitability.
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.
9
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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 as follows:
Form 8-K with date of report March 13, 1997 - filed March 27, 1997
(1) None except as previously reported in Item 3 to the Company's Form
10-KSB for calendar year ended December 31, 1996 as well as in Note 12
to the notes to consolidated financial statements of such Form 10-KSB.
10
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ODESSA FOODS INTERNATIONAL, INC.
By /s/ M. Walter Levine
------------------------------
M. Walter Levine, President
Dated: May 19, 1997
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 715,675
<SECURITIES> 0
<RECEIVABLES> 22,661
<ALLOWANCES> 3,200
<INVENTORY> 6,344
<CURRENT-ASSETS> 746,380
<PP&E> 4,112,485
<DEPRECIATION> 848,078
<TOTAL-ASSETS> 4,967,568
<CURRENT-LIABILITIES> 904,340
<BONDS> 0
0
0
<COMMON> 9,166,648
<OTHER-SE> (5,203,420)
<TOTAL-LIABILITY-AND-EQUITY> 4,967,568
<SALES> 128,988
<TOTAL-REVENUES> 128,988
<CGS> 116,485
<TOTAL-COSTS> 116,485
<OTHER-EXPENSES> 179,982
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,841
<INCOME-PRETAX> (182,320)
<INCOME-TAX> 0
<INCOME-CONTINUING> (182,320)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (182,320)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
