<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended __________________ March 31,1996 ________________
[ ] 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 33-00139-A
Nouveau International, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 23-2932617
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
212 Phillips Road, Exton, PA 19341
(Address of principal executive offices)
(610) 524-8393
(Issuer's telephone number)
_____________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months
(or for such shorter periods 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
As of May 15,1996, the number of shares of Common Stock issued and outstanding
was 11,249,988.
<PAGE> 2
NOUVEAU INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - March 31,1996
and March 31,1995 ............................................................................. 1
Consolidated Condensed Statements of Operations - For the three months ended
March 31, 1996 and 1995......................................................................... 2
Consolidated Condensed Statements of Cash Flows - For the three months ended
March 31,1996 and 1995.......................................................................... 3
Notes to Consolidated Condensed Financial Statements............................................ 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................................................... 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..................................................................... N/A
Item 2. Changes in Securities................................................................. N/A
Item 3. Defaults Upon Senior Securities....................................................... N/A
Item 4. Submission of Matters to a Vote of Security Holders................................... N/A
Item 5. Other Information..................................................................... N/A
Item 6. Exhibits and Reports on Form 8-K...................................................... 12
SIGNATURES............................................................................................... 13
</TABLE>
<PAGE> 3
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
BALANCE SHEETS
<TABLE>
<CAPTION> March 31
--------
A S S E T S 1996 1995
----------- ---- ----
(debtor-in-
possession)
<S> <C> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 131,448 $ 990
Accounts receivable, Trade . . . . . . . . . . . . . . . . . . . . 147,811 11,736
Loans receivable, Officer . . . . . . . . . . . . . . . . . . . . . 200,000
Inventory (Notes A[3] and B) . . . . . . . . . . . . . . . . . . . 3,060,082 606,702
Settlement receivable (Note C) . . . . . . . . . . . . . . . . . . 85,198
Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 22,186
Due from affiliate (Note D). . . . . . . . . . . . . . . . . . . . 32,287 32,287
----------- ------------
Total current assets . . . . . . . . . . . . . . . . . . . 3,679,012 651,715
Property and equipment, net (Notes A [4] and E). . . . . . . . . . . . . . . 160,090 239,336
Settlement receivable (Note C) . . . . . . . . . . . . . . . . . . . . . . . 448,142
Patents, net (Note F ) . . . . . . . . . . . . . . . . . . . . . . . . . . . 528,053
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,501 54,008
----------- ------------
Total Other assets . . . . . . . . . . . . . . . . . . . . 614,554 54,008
----------- ------------
T O T A L . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,901,798 $ 945,059
=========== ============
L I A B I L I T I E S
---------------------
Current liabilities:
Current portion of prepetition liabilities (Note G) . . . . . . . . $ 125,196 $ 5,336,532
Accounts payable, accrued expenses and other
current liabilities . . . . . . . . . . . . . . . . . . . . 281,655 44,382
Dividends payable (Note I [3]). . . . . . . . . . . . . . . . . . . 30,333
----------- ------------
Total current liabilities . . . . . . . . . . . . . . . . . 437,184 5,380,914
Prepetition liabilities (Note G) . . . . . . . . . . . . . . . . . . . . . . 142,196 1,300,950
Fees payable(Note C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000
----------- ------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . 729,380 6,681,864
----------- ------------
STOCKHOLDER'S EQUITY (CAPITAL DEFICIENCY)
-----------------------------------------
Preferred stock, 4% cumulative convertible redeemable (Note I [2] and [3]) . 3,108,333
Common stock (Note I [1]) . . . . . . . . . . . . . . . . . . . . . . . . . 11,250 11,250
Additional paid in capital . . . . . . . . . . . . . . . . . . . . . . . . 378,464 378,464
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . . . . 674,371 (6,126,519)
----------- ------------
Total stockholder's equity
(capital deficiency) . . . . . . . . . . . . . . . . . . 4,172,418 (5,736,805)
----------- ------------
T O T A L . . . . . . . . . . . . . . . . . . . . . . . . . $4,901,798 $ 945,059
=========== ============
</TABLE>
Attention is directed to the accompanying notes to financial statements.
(1)
<PAGE> 4
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1996 1995
---------- -----------
(debtor-in-
possession)
<S> <C> <C>
Revenues:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260,841 $ 41,919
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . 234,880 34,956
---------- -----------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,961 6,963
---------- -----------
Operating expenses:
General and administrative . . . . . . . . . . . . . . . . . . . . . 466,020 85,013
Selling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170,846 12,072
---------- -----------
636,866 97,085
---------- -----------
(Loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . (610,905) (90,122)
---------- -----------
Other income (expenses):
Miscellaneous income . . . . . . . . . . . . . . . . . . . . . . . . 29,400
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . 21,578
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . (1,741) (9,977)
Research and development expense . . . . . . . . . . . . . . (89,207)
Reorganization expense . . . . . . . . . . . . . . . . . . . . . . . (45,602) (750)
---------- -----------
(114,972) 18,673
---------- -----------
NET LOSS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (725,877) ( 71,449)
Retained earnings (Deficit) - beginning of Quarter . . . 1,538,914 (6,055,070)
Appropriation of retained earnings for preferred stock
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . (30,333)
Appropriation of retained earnings for preferred stock
Offering costs . . . . . . . . . . . . . . . . . . . . . . . . . . . (108,333)
---------- -----------
RETAINED EARNINGS (DEFICIT) - END OF QUARTER $ 674,371 $(6,126,519)
========== ===========
Net loss per share of common stock . . . . . . . . . . . . . . . . . $ (.06) $ (.01)
========== ===========
Weighted average shares of common stock outstanding . . . . . . . . 11,249,988 11,249,988
---------- -----------
</TABLE>
Attention is directed to the accompanying notes to financial statements.
(2)
<PAGE> 5
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31
-------------------------------
1996 1995
-------------------------------
debtor - in -
possession)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (725,877) $ (71,449)
Adjustments to reconcile net (loss)
to net cash used in operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 9,468 25,763
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable . . . . . . . . . . . (125,728) 17,243
Decrease in inventory . . . . . . . . . . . . . . . . . . . . . . 114,577 14,596
(Increase) in prepaid expenses and other assets . . . . . . . . . (47,213) (500)
(Decrease) Increase in accounts payable and accrued expenses:
Prepetition . . . . . . . . . . . . . . . . . . . . . . . . . (20,186) 12,944
Postpetition . . . . . . . . . . . . . . . . . . . . . . . . 19,015 (14,539)
Decrease in settlement receivable . . . . . . . . . . . . . . . . 277,496
(Decrease) in fees payable . . . . . . . . . . . . . . . . . (75,000)
----------- -----------
Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . (573,448) (15,942)
----------- -----------
Cash flows from investing activities:
Loans paid to officer. . . . . . . . . . . . . . . . . . . . . . . . . . . . (200,000)
Purchase of property and equipment . . . . . . . . . . . . . . . . . . . . . (47,110)
Repurchase of Technology and patent application fees . . . . . . . . . . . . (533,251)
----------- -----------
Net cash (used in) investing activities . . . . . . . . . . . . (780,361)
----------- -----------
Cash flows from financing activities:
Sale of preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500,000
Payment of offering fees . . . . . . . . . . . . . . . . . . . . . . . . . 500,000
Payment of secured prepetition liabilities . . . . . . . . . . . . . . . . . (1,700,950)
Payment of unsecured prepetition liabilities . . . . . . . . . . . . . . . . (7,000)
Repayment of loans from stockholder . . . . . . . . . . . . . . . . . . . . (183,764)
----------- -----------
Net cash provided by (used in) financing activities . . . . . . 1,108,286
----------- -----------
NET INCREASE (DECREASE) IN CASH . . . . . . . . . . . . . . . . . . . . . . . . (245,523) (15,942)
Cash - beginning of Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . 376,971 16,932
----------- -----------
CASH - END OF QUARTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 131,448 $ 990
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest . . . . . . . . . . . . . . . . . . $ 1,741 $ 1,360
</TABLE>
Attention is directed to the accompanying notes to financial statements.
(3)
<PAGE> 6
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - Business and Summary of Significant Accounting Principles:
(1) The Company:
Nouveau International, Inc. and subsidiaries (the "Company")
manufactures and distributes hot food vending machines and related food
products. The Company uses certain proprietary machine and food technology in
the manufacture of its products.
On October 24,1994, the Company (the "Debtor") filed petitions
for relief under Chapter 11 of the federal bankruptcy laws in the United
States Bankruptcy Court and subsequently submitted a plan of reorganization to
the court. Under Chapter 11, certain claims against the Debtor in existence
prior to the filing of the petitions for relief under the federal bankruptcy
laws were stayed while the Debtor continued business operations as Debtor-in-
possession. On December 8, 1995 the plan of reorganization (the "Plan") was
confirmed.
(2) Principles of consolidation:
The consolidated financial statements of Nouveau International, Inc.
include the accounts of its wholly owned subsidiaries, Nouveau Foods
International, Inc., Nouveau Vend International, Inc.,Nouveau Equities, Inc
and Nouveau International (PA), Inc. Intercompany balances and transactions
have been eliminated in the consolidated financial statements.
(3) Inventories:
Inventories are valued at the lower of cost (first-in, first-out
method) or market.
(4) Property and equipment:
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets (5 to 7 years).
(5) Income taxes:
The Company accounts for income taxes in accordance with the
provisions of SFAS No. 109 "Accounting for Income Taxes." SFAS No. 109
provides for income taxes to be accounted for based on the difference between
reported amounts of assets and liabilities and their tax bases.
The confirmation of the plan of reorganization, has eliminated all net
operating loss carryforwards which were available to offset future taxable
income.
(6) Use of estimates:
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.
(4)
<PAGE> 7
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE B) - Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31,
-----------------------------
1996 1995
---------- ----------
(debtor-in-
possession)
<S> <C> <C>
Component parts . . . . . . . . . . . . . . . . . . . . . $1,461,362 $ 93,113
Work-in-process . . . . . . . . . . . . . . . . . . . . . 151,800 55,962
Finished machines . . . . . . . . . . . . . . . . . . . . 1,446,920 $457,627
---------- --------
T o t a l . . . . . . . . . . . . $3,060,082 $606,702
========== ========
</TABLE>
Included in inventory at March 31, 1996 is approximately $900,000 of
parts and substantially all of the work-in-process and finished machines, less
components needed to ready and ship 38 machines during the quarter, which were
received from a vendor pursuant to the litigation settlement referred to in
Note C. These goods were valued at their current replacement cost.
(NOTE C) - Litigation Settlement:
In 1995, the Company settled a lawsuit with the former supplier of its
vending machines. Under the terms of the settlement agreement, the supplier
canceled accounts payable of $884,975 and agreed to pay the Company cash of
$3,938,000 and deliver to the Company inventory parts, work-in-process and
finished machines held by them, which were valued at $2,592,914. The Company
has received cash payments totaling $3,338,000 through March 1996; the
remaining balance is due in installments of $100,000 in June 1996 and final
installment of $500,000 in June 1997.
The settlement balance receivable is shown at its net present value
discounted at an effective interest rate of 11% per annum. The bankruptcy
court ordered that a portion of the cash proceeds of the settlement be used to
pay a secured claim owed to a creditor (Note G) and attorneys' fees for
services rendered in connection with the settlement of the lawsuit. Fees
payable to the litigating attorneys amount to $225,000 at March 31,1996. The
current portion due of $75,000 is included in accounts payable and accrued
expenses in the accompanying balance sheet.
(NOTE D) - Due From Affiliate:
Due from affiliate consists of a loan due on demand from a company
which is wholly owned by the stockholder of the Company.
(5)
<PAGE> 8
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE E) - Property and Equipment:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
March 31
-----------------------------
1996 1995
--------- ---------
(debtor-in
possession)
<S> <C> <C>
Machinery and equipment . . . . . . . . . . . . . . . $ 244,267 $ 425,027
Furniture and fixtures . . . . . . . . . . . . . . . . 51,486 23,015
Transportation equipment . . . . . . . . . . . . . . . 13,596 7,032
--------- ---------
309,349 455,074
Less accumulated depreciation . . . . . . . . . . . . 149,259 215,738
--------- ---------
T o t a l . . . . . . . . . . . . . . . . . $ 160,090 $ 239,336
========= =========
</TABLE>
The Company limited production to the assembly of vending machines
during the first three months of 1995. The Company discontinued depreciating
manufacturing equipment for the remainder of 1995 and for the quarter ended
March 31,1996. During 1996, the Company expects to resume full production and
will depreciate its manufacturing equipment over its remaining useful life or
make a determination to abandon this equipment based on its current needs and
methods of production.
(NOTE F) - Patents
In January 1996, using a portion of the proceeds received from the
sale of preferred stock, the Company paid to a creditor the sum of $530,821 to
repurchase, for its exclusive use, certain technology patents. These patents
and the cost of other patents are listed net of amortzation.
(6)
<PAGE> 9
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE G) - Prepetition Liabilities:
Prepetition liabilities consists of the following:
<TABLE>
<CAPTION>
March 31,
--------------------------------
1996 1995
----------- -------------
(debtor-in
possession)
<S> <C> <C>
Secured:
Former investor . . . . . . . . . . . . . . . . . . . . . $ -0- $ 2,900,950
Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,590
---------- -------------
-0- 3,065,540
---------- -------------
Priority:
Tax claims . . . . . . . . . . . . . . . . . . . . . . . . 80,076
Former stockholder . . . . . . . . . . . . . . . . . . . . 10,000
---------- -------------
10,000 80,076
--------- -------------
Unsecured:
Stockholders . . . . . . . . . . . . . . . . . . . . . . . 15,638 226,356
Trade and other miscellaneous claims . . . . . . . . . . . . . 145,236 2,300,333
Former investor. . . . . . . . . . . . . . . . . . . . . . 96,518 965,177
---------- -------------
257,392 3,491,866
---------- -------------
T o t a l . . . . . . . . . . . . . . . . . . . . . . 267,392 6,637,482
Less current portion . . . . . . . . . . . . . . . . . . . 125,196 5,336,532
---------- -------------
Noncurrent portion . . . . . . . . . . . . . . . . . . . . $ 142,196 $ 1,300,950
========== =============
</TABLE>
When the Company petitioned for bankruptcy in October 1994 two claims
were owed to secured creditors. The first claim was owed to a bank who was
paid in full in June of 1995. The payment amounted to a $175,000 including
accrued interest of $28,571. The remaining claim was payable to a former
investor in the Company and was partly collateralized by the proceeds of the
litigation settlement referred to in Note C. Total payments made against this
claim through December 31, 1995 amount to $1,200,000. In January 1996, the
Company used a portion of the proceeds received from the sale of preferred
stock (Note I) to pay the remaining balance of secured claims owed to the
former investor of $1,700,950.
(7)
<PAGE> 10
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE G) - Prepetition Liabilities: (continued)
Priority claims consist of unpaid rent due to a former stockholder for leased
premises which were vacated in 1995.
Upon conformation of the plan of reorganization, unsecured claims, including
those due to certain stockholders and the former investor were settled for 10%
of their prepetition amount and are payable in two equal installments of 5%
each in December 1996 and December 1997. Cancellation of debt pursuant to the
plan of reorganization resulted in an extraordinary gain of $2,307,606, which
was recognized at December 31, 1995.
Minimum payments remaining for all claims under the plan of
reorganization are as follows:
<TABLE>
<CAPTION>
Secured Priority Unsecured Total
------- -------- --------- -----
<S> <C> <C> <C> <C>
1996 . . . . . . . . . . . . . . . . . . . . . -0- -0- $125,196 $125,196
1997 . . . . . . . . . . . . . . . . . . . . . -0- 10,000 132,196 142,196
----- ------- -------- --------
$ -0- $10,000 $257,392 $267,392
===== ======= ======== ========
</TABLE>
(8)
<PAGE> 11
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE H) - Commitments and Contingencies:
The Company occupies premises pursuant to an operating lease which
expires in July 1998. In addition, the Company entered into a three year lease
in January 1996 for a building which it intends to use as a facility to
assemble and store pizza vending machines. The new lease expires on March
31,1999. These leases are subject to escalation's for the Company's pro rata
share of real estate taxes and operating expense. Future minimum rental
payments, exclusive of escalation payments for taxes and utilities, under these
leases are as follows:
<TABLE>
<CAPTION>
Nine months ending December 31
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,844
Year ending December 31
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,440
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,662
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . $161,946
========
</TABLE>
The Company also leases certain storage facilities on a month-to-month
basis. For three months ended March 31,1996, rent expense totaled to $10,800.
For the same period ended in 1995, rent expense amounted to $12,600 which was
paid to a former stockholder.
(NOTE I) - Capital Stock:
(1) At March 31, 1996, 25,000,000 shares of $.001 par common stock are
authorized, of which 11,249,988 are outstanding.
(2) In January 1996, all of the outstanding stock of the Company was acquired
by Health Management, Inc. ("HMI") in exchange for 6,750,000 shares,
representing 60%, of HMI common stock. HMI was a nonoperating company and
therefore the acquisition will not be accounted for as a business combination.
Concurrent with the transaction, in a private placement, HMI sold 70 units,
each unit consisting of 1 share of 4% cumulative redeemable preferred stock and
1,608 common stock purchase warrants for $3,500,000. HMI changed its name to
Nouveau International, Inc. ("NI").
(3) The preferred stock is mandatorily redeemable at a price per share which
is equal to the original issuance price plus accrued dividends on the earlier
of the date of a public offering of its common stock for minimum gross proceeds
of $5,000,000 or January 4, 1997. If not redeemed through the public offering,
the Company may, at its option, convert the preferred stock into 1,125,000
shares of common stock. The preferred stock has liquidation value equal to the
redemption value.
Each common stock purchase warrant entitles the holder to purchase one
share of the new Company's common stock at an exercise price of $.50 per share.
The warrants expire in January 1999.
(9)
<PAGE> 12
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE J) - Related Party Transactions
In December 1994, the Company formed a joint venture in Italy. The
joint venture company, called Nouveau Cordon Bleu and incorporated as an Irish
company, is the European licensee for the Company. The Company provided the
license to its proprietary technology and other parties provided capital and
ongoing management with each becoming a 50% owner of the joint venture. The
Company currently provides managerial support to the enterprise. The license
agreement provides that Nouveau Cordon Bleu will purchase a minimum of 1,000
machines per year. As the European licensee, Nouveau Cordon Bleu will also
assist the Company in selling master distributorships, each of which will act
as the exclusive distributor of the Company's products in their respective
designated regions. The distributors will be required to purchase a minimum
number of machines annually in order to maintain regional exclusivity. The
Company does not believe that this joint venture generated any profits during
1995. During the time the Company was in bankruptcy proceedings the parties to
the joint venture agreement informally suspended any performance guarantees
provided for in the agreements. During the three months ended March 31,1996, a
majority of the Company's sales were to Nouveau Cordon Bleu.
(10)
<PAGE> 13
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
Background
In January 1996, Health Management, Inc. ("HMI"), a Florida
corporation, which at the time had not engaged in any business for over two
years and had virtually no assets, reincorporated in the State of Delaware and
exchanged its common stock for all of the outstanding capital stock of Nouveau
International, Inc. ("Nouveau PA"), a Pennsylvania corporation. HMI also
changed its name to Nouveau International, Inc. following the acquisition of
Nouveau PA. References herein to the Company's products, business operations
and financial condition refer to the products, business operations and
financial condition of Nouveau PA unless otherwise indicated. During 1995 the
Company was in bankruptcy proceedings and had essentially ceased operations.
In December 1995, the Company emerged from bankruptcy and in January 1996
completed a private placement of it's securities which provided the Company
with funds to recommence operation. Therefore, management does not believe
that a comparison of financial operations and conditions to the corresponding
period in 1995 would be meaningful.
Results of Operations
During the three months ended March 31,1996, the net loss was ($725,877)
compared to a net loss of ($71,449) for the three months ended March 31, 1995.
During the period ended March 31,1996, the Company had net sales of $260,841
compared with net sales of $41,919 for the three months ended March 31,1995.
Revenues consisted of approximately $215,600 in machine sales and approximately
$45,200 in food product sales. Substantially all of the revenues were from
foreign sales with a majority of sales to a joint venture partner. All of the
machines sold were pizza vending machines. Beginning in the second quarter the
Company began to market sandwich vending machines.
Operating expenses for the three months ended March 31,1996 totaled $636,866.
For the three months ended March 31,1995 operating expenses were $97,085.
Selling expenses account for $170,849 of the total operating expenses for the
period ended March 31,1996. Administrative salaries totaled approximately
$182,400 for the period ended March 31,1996, as compared to approximately
$26,000 for the quarter ended March 31,1995. Accounting and Legal fees equaled
approximately $181,500 for the three months ended March 31, 1996, while no
expenditures where paid on these types of services at March 31, 1995.
Dividends accrued on the Company's preferred stock at March 31,1996 equaled
$30,333.
Liquidity and Capital Resources
On March 31,1996, the Company had working capital of approximately $3,242,000
compared to a working capital deficiency of $4,729,199 for the three months
ended March 31,1995.
During the period ending March 31,1996, the Company advanced $200,000 to its
Chief Executive Officer. In April 1996, $100,000 of the advance was repaid
with interest.
During the period ending March 31,1996, the Company received $3,045,000 in net
proceeds from the private placement of securities. Substantially all of these
funds were expended during the period.
In March 1996, the Company received $300,000 as part of a settlement of a
lawsuit. The remaining balance is due in installments of $100,000 in June 1996
and $500,000 in June 1997. The settlement was with a former manufacturer of
the Company's vending machines. The total amount of the settlement was
$5,109,000 and consisted of $3,038,000 in cash, inventory valued at $2,592,000
and receivables of $363,000 less cancellation of accounts payables of $884,000.
The settlement was reached in September 1995. The Company used the major
portion of the cash received to repay a secured creditor. The Company is
currently selling vending machines from the inventory received in the
settlement.
(11)
<PAGE> 14
The Company currently obtains its pizza food products from a sole vendor
pursuant to a co-pack agreement. The agreement provides that the price can be
adjusted by the vendor annually. The agreement may be terminated by the vendor
at any time upon ninety days notice. The Company has been notified by the
vendor of a price increase. The Company is also concerned with the quality of
the food products being produced by the vendor and is taking extra measures to
insure the quality of the food products. These extra measures are increasing
the Company's cost for its food products, the loss of this product source at
this time would have a material adverse effect on the Company's operation. In
order to more closely control the cost and quality of its food products as well
as have a more secure source of food products. The Company, in February 1996,
entered into an agreement to purchase a facility capable of manufacturing the
Company's food products. The Company is required to pay $50,000 to lease the
facility until the closing on the sale which is scheduled for June 1996. As of
May 15, 1996, the Company had paid $50,000 toward the lease payments. At closing
the Company will be required to pay $1,320,000 to purchase the facility.
Management presently estimates that it will cost approximately $700,000 to
renovate the facility so that the Company can begin food manufacturing
operations. The Company will also need additional funds to finance the
manufacturing of its vending machines. The amount of funds will be determined
by the number of vending machines that are ordered. The Company's current
inventory can supply approximately 728 machines provided that additional parts
are ordered.
As of May 15,1996, the Company had limited cash resources. The Company is also
experiencing delays in payments from its distributors. On May 15,1996, the
Company received an advance of $50,000 on a demand basis. Interest is payable
on the advance at a rate of 10%.
The Company will require additional funding to fund its food production
operation, for working capital and to purchase vending machines. The Company
is currently in the process of attempting to raise additional financing through
a private placement of its debt securities to meet its short term capital
needs. The Company is also seeking additional sources of financing to meet its
longer term needs. No assurance can be given that the Company will be able to
obtain any additional financing. In the event the Company is not able to raise
funds on a timely basis its operations will be materially affected.
Item 6 Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27.0 Financial data schedule
</TABLE>
(12)
<PAGE> 15
SIGNATURES
In accordance with the Exchange Act, the registrant has caused this report to
be signed on its behalf by the undersigned, duly authorized.
DATED: May 17, 1996 NOUVEAU INTERNATIONAL, INC.
BY: /S/ Gary W. Black, Sr.
------------------------------
Gary W. Black, Sr.
Chief Executive Officer
and Chief Financial Officer
(13)
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 131,448
<SECURITIES> 0
<RECEIVABLES> 147,811
<ALLOWANCES> 0
<INVENTORY> 3,060,082
<CURRENT-ASSETS> 3,679,012
<PP&E> 309,349
<DEPRECIATION> 149,259
<TOTAL-ASSETS> 4,901,798
<CURRENT-LIABILITIES> 437,184
<BONDS> 0
3,108,333
0
<COMMON> 11,250
<OTHER-SE> 1,052,835
<TOTAL-LIABILITY-AND-EQUITY> 4,901,798
<SALES> 260,841
<TOTAL-REVENUES> 260,841
<CGS> 234,880
<TOTAL-COSTS> 405,726
<OTHER-EXPENSES> 466,020
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,741
<INCOME-PRETAX> (725,877)
<INCOME-TAX> 0
<INCOME-CONTINUING> (725,877)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (725,877)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
