<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission file number 01-15109
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MAGNOLIA FOODS, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1251800
-------- ----------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 54714, Oklahoma City, Okla. 73154
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(Address of principal executive offices)
(405) 840-9655
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(Registrant's telephone number, including area code)
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. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock 24,941,388
Par Value $0.01 Shares outstanding as of
per share June 30, 1996
Transitional Small Business Disclosure Format Yes No X
--- ---
<PAGE> 2
MAGNOLIA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
--------- ------------
(unaudited)
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS
Cash and Temporary Cash
Investments $ 38,628 78,926
Accounts Receivable 10,188 16,903
Inventories 36,127 47,248
Prepaid Expense 2,189 9,187
Short Term Investments -0- -0-
--------- ---------
Total current assets 87,132 152,264
PROPERTY AND EQUIPMENT
Leasehold Improvements 242,170 335,305
Furniture and Equipment 196,097 270,927
Equipment Not in Use 5,000 5,000
--------- ---------
443,267 611,232
Less Accumulated Depreciation (183,134) (180,326)
--------- ---------
260,133 430,906
OTHER ASSETS
Franchise Rights (Net) 48,650 50,000
Other Investments 46,190 29,881
Organization Costs (Net) 12,466 14,543
Deposits 9,062 30,624
Receivable from Related Parties 53,954 53,954
--------- ---------
170,322 179,002
--------- ---------
TOTAL ASSETS $ 517,587 $ 762,172
--------- ---------
--------- ---------
</TABLE>
See Accompanying Notes
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<PAGE> 3
MAGNOLIA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S
EQUITY
CURENT LIABILITIES
Accounts Payable $ 443,656 367,262
Accrued Expense 78,164 111,210
Reserve for Closed Stores 44,666 210,864
Notes Payable 552,154 341,758
----------- -----------
TOTAL CURRENT LIABILITIES 1,118,640 1,031,094
----------- -----------
STOCKHOLDER'S EQUITY
Series B 10% cumulative convertible
Preferred Stock, par value $.10
per share - 25,000 shares authorized,
issued and outstanding 2,500 2,500
Common stock, par value $.01 per
share; 25,000,000 shares authorized,
24,945,868 and 24,925,118 shares
issued in 1996 and 1995 and
24,922,588 and 24,941,338
outstanding in 1996 and 1995 249,459 249,271
Additional paid-in capital 4,590,523 4,601,831
Retained Earnings (Deficit) (5,442,333) (5,121,322)
----------- -----------
599,851 267,720
Less Treasury stock - 4,530
Shares at Cost 1,202 1,202
----------- -----------
601,053 268,922
----------- -----------
TOTAL LIABILITIES ABD STOCK- $ 517,587 762,172
----------- -----------
HOLDERS EQUITY
----------- -----------
</TABLE>
See Accompanying Notes
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<PAGE> 4
MAGNOLIA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30 June 30
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Food and beverage sales $ 386,865 767,355 $ 822,124 1,585,025
Interest and Other 1 22,091 79 23,032
------------ ------------ ------------ ------------
Total Operating Revenues 386,866 789,446 822,203 1,608,057
COSTS AND EXPENSES
Cost of sales 132,967 277,358 283,731 583,581
Restaurant operating 259,584 471,966 582,002 941,180
General and administrative 133,303 104,340 199,045 228,412
Interest 17,804 9,145 26,723 12,645
Depreciation and amortization 17,792 44,537 51,713 92,991
------------ ------------ ------------ ------------
561,450 907,346 1,143,214 1,858,809
Net Income (Loss) (174,584) (223,922) (321,011) (356,744)
Income (Loss) per Common Share (0.01) (0.01) (0.01) (0.01)
Average number of common
shares outstanding 24,928,834 17,828,259 24,925,713 17,099,593
</TABLE>
See Accompanying Notes
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<PAGE> 5
MAGNOLIA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Operating Activities
- --------------------
Net Income (Loss) $(321,011) $(326,774)
Items not Affecting Cash from
Operating Activities:
Depreciation and amortization 51,713 92,991
Changes in Operating Assets &
Liabilities:
Receivables (6,715) (69,543)
Inventories 11,121 24,586
Other Assets (6,548) (44,420)
Payables & Accruals (43,340) (89,417)
Reserve for Closed Locations (25,199) -0-
--------- ---------
Net cash provided (used) in
Operating Activities $(226,765) $(272,235)
Investing Activities:
- ---------------------
Acquisition of Other Investments $ (16,309) $ 9,500
Return of Investment ________ 100,000
Sale of Equipment 3,500 6,212
--------- ---------
Net cash provided (used) by
investing activities $ 12,809 $ (95,999)
Financing Activities:
- ---------------------
Proceeds from Notes $ 235,396 $ 100,000
Payments of Notes (25,000) (4,127)
Offering Costs (15,507) (1,191)
Exercise of Stock Options 3,937
--------- ---------
Net cash provided (used) by
financing activities $ 199,276 $ 94,682
Increase (Decrease) in Cash $ (40,298) $ (81,554)
Cash - Beginning of Period 78,926 127,243
--------- ---------
Cash - End of Period $ 38,628 $ 45,689
--------- ---------
</TABLE>
See Accompanying Notes
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<PAGE> 6
MAGNOLIA FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED June 30, 1996
(unaudited)
<TABLE>
<CAPTION>
Series Additional
Preferred Common Paid-in Accumulated Treasury
Stock Stock Capital (Deficit) Stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1996 $ 2,500 $ 244,271 $4,601,831 $(5,121,322) $ (1,202) $ 268,922
Offering Costs (15,057) (15,057)
Exercise of Warrants 188 3,749 3,937
Net Loss (321,011) (321,011)
--------- ---------- ---------- ----------- -------- ---------
BalanceJune 30, 1996 $ 2,500 $ 249,459 $4,590,523 $(5,442,333) $ (1,202) $ 601,053
--------- ---------- ---------- ----------- -------- ---------
--------- ---------- ---------- ----------- -------- ---------
</TABLE>
See accompanying notes
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<PAGE> 7
MAGNOLIA FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Basis of Presentation
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting only of
normal recurring accruals) necessary to present consolidated financial
position as of June 30, 1996 and the consolidated results of operations and
the consolidated statements of cash flows for the six- month period ended June
30, 1996 and it is not necessarily indicative of the results to be expected
for the full year.
2. Accounting Policies
During interim periods the Company follows the accounting policies set
forth in its consolidated financial statements included in its annual report
on Form 10-KSB. Reference should be made to such financial statements for
information on such accounting policies and further financial details.
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<PAGE> 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
Revenues and Operations
Revenues for the three month period reflected the results of three
Skolniks Bagel Bakery Restaurants in 1996 versus seven open restaurants in
1995. For the quarter, costs of sales in the Skolniks restaurants ran 34.4%
with restaurant operating expenses running 67.1% as compared to 36.1% and
61.5% in the same quarter last year.
The company is currently negotiating the sale of the three remaining
Skolniks restaurants.
Liquidity
Working capital at June 30, 1996 was a deficit of $1,031,508 compared to
a deficit of $878,830 at December 1995. The decrease in working capital
results from operating losses for the period.
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<PAGE> 9
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are included herein:
(11) Statement re: computation of earnings per share.
(b) The Company did not file any reports on Form 8-K during the quarter.
ITEM 1. LEGAL PROCEEDINGS
Country Club Associates sued Magnolia Foods, Inc. under the guaranty of
its real estate lease. The case was settled out of court.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An annual shareholders meeting was held on June 26, 1996 at 3:30 P.M. for
the following purposes:
1. To elect three directors of the Corporation to hold office until
their successors shall have been elected and shall qualify;
2. To approve the adoption of a stock option plan;
3. To ratify the appointment of Peters & Chandler, CPA's, Inc. as
independent public accounts for the Corporation;
4. To authorize the increase of authorized Common Stock to 50,000,000
and to decrease the par value to $0.005 per share; and
5. To transact such other business as may properly come before the
meeting.
The voting results are laid out as follows:
Stock Option Plan - 17,732,131 For
514,000 Abstain
822,300 Against
Increase In Common Stock - 18,901,131 For
50,000 Abstain
116,800 Against
Independent Auditors - 17,623,529 For
500 Abstain
3,300 Against
Proxies Vote On Other Business - 15,584,881 For
3,482,260 Abstain
1,300 Against
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<PAGE> 10
The following persons were nominated to serve for the terms indicated, or until
their successors are elected and have qualified:
Joseph J. Johnston, Jr.
David Loveland
Bill Weaver
The vote tabulation was as follows:
<TABLE>
<CAPTION>
Name For Against Abstain
- ---- --- ------- -------
<S> <C> <C> <C>
Joseph J. Johnston, Jr. 16,217,131 -0- 2,001,000
David Loveland 16,217,131 700,000 2,001,000
Bill Weaver 16,217,131 850,000 2,001,000
</TABLE>
There was a proxy solicitation and no change in directors.
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<PAGE> 11
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAGNOLIA FOODS, INC.
Dated: 8/15/96 By: /s/ JOSEPH J. JOHNSTON
------------- -----------------------------
Joseph J. Johnston
President and
Chief Financial Officer
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<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
11 - Statement re: computation of earnings per share
27 - Financial Data Schedule
</TABLE>
<PAGE> 1
(11) STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income (loss) for computing
earnings per common share $ (174,584) $ (223,922) $ (321,011) $ (356,774)
Weighted average number of
common shares outstanding
during each period without
dilution 24,928,838 17,828,259 24,925,713 17,099,593
Addition from assumed exercise
of Common Stock warrants 1,245,000 1,120,000 1,245,000 1,120,000
Addition from assumed
conversion of Preferred Stock 300,000 300,000 300,000 300,000
------------ ------------ ------------ ------------
26,473,838 19,248,259 26,470,713 18,519,593
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net income per common share
Without Dilution $ (0.01) $ (0.01) $ (0.01) $ (0.02)
Fully diluted $ (0.01) $ (0.01) $ (0.01) $ (0.02)
</TABLE>
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 38,678
<SECURITIES> 0
<RECEIVABLES> 10,188
<ALLOWANCES> 0
<INVENTORY> 36,127
<CURRENT-ASSETS> 87,132
<PP&E> 443,267
<DEPRECIATION> 183,134
<TOTAL-ASSETS> 517,587
<CURRENT-LIABILITIES> 1,118,640
<BONDS> 0
<COMMON> 249,459
0
2,500
<OTHER-SE> 853,012
<TOTAL-LIABILITY-AND-EQUITY> 517,587
<SALES> 386,865
<TOTAL-REVENUES> 386,866
<CGS> 132,967
<TOTAL-COSTS> 543,646
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 174,584
<INCOME-TAX> 0
<INCOME-CONTINUING> 174,584
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 174,584
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
