<PAGE>
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, 1997
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or
/ / TRANSITION REPORT PURSUANT TO 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
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Odessa Foods International, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 75-1613360
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.SEmployer
incorporation or organization) Identification No.)
c/o M. Walter Levine, 18 Reynolds Street, Norwalk, Connecticut 06851
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Address of principal executive offices) (Zip Code)
(203) 854-1000
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(Registrant's telephone number, including area code)
1 River Road, Cos Cob, Connecticut
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(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 December 18, 1997 is 14,076,810 shares, all of one class
of $.00001 par value common stock.
<PAGE>
TABLE OF CONTENTS
Page No.
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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 8-10
PART II
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a
Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
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<PAGE>
ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 19,675
Accounts receivable, less allowance for doubtful accounts 38,587
Inventories 46,183
Prepaid expenses 4,400
-----------
TOTAL CURRENT ASSETS 108,845
-----------
PROPERTY AND EQUIPMENT, at cost, less
accumulated depreciation of $993,082 3,388,126
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OTHER ASSETS:
Intangible asset, less amortization of $126,000 234,000
Prepaid lease cost 866,555
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TOTAL OTHER ASSETS 1,100,555
-----------
$ 4,597,526
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-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 447,447
Note payable - bank 75,000
Loans payable 332,339
Current maturities of note payable - officer 100,000
-----------
TOTAL CURRENT LIABILITIES 954,786
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NOTE PAYABLE - OFFICER 100,000
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STOCKHOLDERS' EQUITY:
Common stock, $.00001 par value, authorized
25,000,000 shares; issued and outstanding
14,076,810 shares 137
Additional paid-in capital 9,166,511
Foreign currency translation adjustment (33,989)
Accumulated deficit (5,589,919)
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TOTAL STOCKHOLDERS' EQUITY 3,542,740
-----------
$ 4,597,526
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-----------
See notes to financial statements.
-3-
<PAGE>
ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $ 98,614 $ 162,802 $ 245,876 $ 407,561
COST OF SALES 109,234 124,475 257,836 312,907
---------- ---------- ---------- ----------
GROSS PROFIT (LOSS) (10,620) 38,327 (11,960) 94,654
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Selling, general and
administrative expenses 109,215 158,940 351,629 633,283
Depreciation and amortization 84,000 74,021 238,839 235,103
---------- ---------- ---------- ----------
193,215 232,961 590,468 868,386
---------- ---------- ---------- ----------
OPERATING LOSS (203,835) (194,634) (602,428) (773,732)
---------- ---------- ---------- ----------
OTHER EXPENSES (INCOME):
Interest - - 1,867 20,500
Foreign currency exchange rate changes 1,499 - (40,177) (10,639)
---------- ---------- ---------- ----------
1,499 - (38,310) 9,861
---------- ---------- ---------- ----------
NET LOSS $ (205,334) $(194,634) $ (564,118) $ (783,593)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
NET LOSS PER SHARE $ (.02) $ (.02) $ (.04) $ (.07)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 13,716,810 11,398,799 13,099,960 10,770,266
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See notes to financial statement
-4-
<PAGE>
ODESSA FOODS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
CASH FROM OPERATING ACTIVITIES:
Net loss................................. $(205,334) $(194,634) $ (564,118) $(783,593)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization.......... 84,000 74,021 238,839 235,103
Sundry other items..................... -- -- -- 461
Changes in assets and liabilities:
Accounts receivable.................... (23,869) 2,989 (11,129) (927)
Inventories............................ 8,189 778 (30,958) (7,394)
Prepaid expenses and sundry assets..... (42,994) (85,982) (222,876) (246,100)
Accounts payable and accrued expenses.. 204,420 230,435 24,890 377,000
---------- ---------- ----------- ----------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES............... 24,412 27,607 (614,932) (425,450)
---------- ---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment....... (153,344) (343,305) (380,718) (514,592)
---------- ---------- ----------- ----------
NET CASH USED IN INVESTING
ACTIVITIES......................... (153,344) (343,305) (380,718) (514,592)
---------- ---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock................. -- 250,000 1,086,250 916,555
Loans from stockholders.................. 106,040 53,402 (50,320) 81,301
---------- ---------- ----------- ----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES......................... 106,040 303,402 1,035,930 997,856
---------- ---------- ----------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.... (5,360) -- (33,989) 10,639
---------- ---------- ----------- ----------
INCREASE (DECREASE) IN CASH................ (28,252) (12,296) 6,291 68,453
---------- ---------- ----------- ----------
CASH - BEGINNING OF PERIOD................. 47,927 185,099 13,384 104,350
---------- ---------- ----------- ----------
CASH - END OF PERIOD....................... $ 19,675 $ 172,803 $ 19,675 $ 172,803
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>
See notes to financial statements
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<PAGE>
ODESSA FOODS INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Odessa
Foods International, Inc. (the "Company") as of September 30, 1997 and for
the nine month periods ended September 30, 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 nine months ended September 30, 1997 were $245,876, a
decrease of $161,685 or 39.7% from $407,561 in the comparable 1896 quarter.
The Company had net loss of $564,118, or $.04 per share, for the nine
months ended September 30, 1997 compared to net loss of $783,593, or $.07 per
share, for the comparable quarter in 1996.
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<PAGE>
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-
<PAGE>
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 September 30, 1997 and the
comparative three month period ended September 30, 1996 (as well as for the nine
month period ended September 30, 1997 and the comparative nine 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 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 September 30, 1996 and September 30,
1997.
Net loss for the three months ended September 30, 1997 was $205,334
compared to a net loss of $194,634 for the three months ended September 30,
1996. Gross profit decreased by $48,947 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 by
$39,746 as a result of selling, general and administrative expenses
decreasing by $49,725, while depreciation and amortization increased by
$9,979. In addition, the Company incurred additional "Other Expenses" for
the three month period ended September 30, 1997 of $1,499 consisting of
foreign currency exchange rate change.
Comparative nine month periods ended September 30, 1996 and September 30,
1997.
Net loss for the nine months ended September 30, 1997 was $56,418 compared
to a net loss of $783,593 for the nine months ended September 30, 1996. Gross
profit decreased by $106,614 in 1997 as compared to 1996 as a result of lower
sales and higher cost of sales percentages. Operating expenses decreased for
the comparative nine month period indicated by $277,918 as a result of selling,
general and administrative expenses decreasing by $281,654, while depreciation
and amortization increased by $3,736. In addition, the Company incurred
additional "Other Expenses" for the nine month period ended September 30, 1997
of $38,310 consisting of interest income of $1,867 offset by foreign currency
exchange rate changes loss of $40,177 (as compared to "Other Income" for the
nine month period ended September 30, 1996 of $9,861 consisting of interest
income of $20,500 offset by foreign currency exchange rate changes loss of
$10,639).
-8-
<PAGE>
Consolidated Balance Sheet:
Total assets of the Company at September 30, 1997 and December 31, 1996
were $4,591,526 and $4,184,593 respectively, an increase of $412,933. Such
increase is primarily attributable to an increase in (a) current assets of
$51,078 (primarily as a result of increases in cash of $6,291, inventories of
$30,958, prepaid expenses of $2,700 and accounts receivable of $11,129), (b)
property and equipment of $138,879 (after taking into account accumulated
depreciation) and (c) other assets of $192,976 (i.e. increase in prepaid lease
costs of $219,976 offset by a $27,000 decrease in intangible assets).
Current liabilities of the Company at September 30, 1997 and December 31,
1996 were $954,786 and $1,029,996 respectively. The decrease in total current
liabilities of $75,180 is attributable to the fact that accounts payable and
accrued expenses decreased by $24,890 and loan(s) payable decreased by $50,320.
Stockholders' equity increased by $488,143 from $3,054,597 at December 31,
1996 to $3,542,740 at September 30, 1997. This increase primarily resulted from
the Company's sale of 2,160,000 shares of its common stock during the three
month period ended March 31, 1997 for an aggregate of $1,086,250 (net of related
expenses) minus the net loss of $564,118 sustained for the nine months ended
September 30, 1997 and a foreign currency translation adjustment of $33,989.
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
September 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.
-9-
<PAGE>
While the Company did not issue any shares of its common stock for cash
consideration (by way of debt and/or equity financing) during the quarter ended
June 30, 1997 it did, however, issue 360,000 shares of its common stock in
exchange for and in full consideration for its purchase of its salami production
facilities in Stabio, Switzerland, which shares were issued in the name of
Rapello S.A. an unaffiliated third party pursuant to contractual agreement
whereby such third party is to receive such shares upon completion of certain
specified services directly related to the purchase of the aforesaid facilities.
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
$(176,464) for the quarter ended June 30, 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 and/or (c) the purchase of necessary
facilities through issuance of shares of common stock in the manner indicated in
the preceding paragraph.
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.
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<PAGE>
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 - None
(1) None except with respect to on-going litigation 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.
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<PAGE>
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: December 15 , 1997
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 19,675
<SECURITIES> 0
<RECEIVABLES> 38,587
<ALLOWANCES> 0
<INVENTORY> 46,183
<CURRENT-ASSETS> 108,845
<PP&E> 4,381,208
<DEPRECIATION> 993,082
<TOTAL-ASSETS> 4,597,526
<CURRENT-LIABILITIES> 954,786
<BONDS> 0
0
0
<COMMON> 137
<OTHER-SE> 3,542,603
<TOTAL-LIABILITY-AND-EQUITY> 4,597,526
<SALES> 245,876
<TOTAL-REVENUES> 245,876
<CGS> 257,836
<TOTAL-COSTS> 257,836
<OTHER-EXPENSES> 590,468
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,867
<INCOME-PRETAX> (564,118)
<INCOME-TAX> 0
<INCOME-CONTINUING> (564,118)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (564,118)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
