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<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 September 30, 1996
Commission file number 01-15109
--------
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
----------------------------------------------------------------------
(Address of principal executive offices)
(405) 840-9655
---------------
(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 36,413,439
Par Value $0.01 Shares outstanding as of
per share September 30, 1996
Transitional Small Business Disclosure Format Yes No X
----- -----
<PAGE> 2
MAGNOLIA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Temporary Cash
Investments $ 55,412 78,926
Accounts Receivable 3,838 16,903
Inventories 15,108 47,248
Notes Receivable 48,491 9,187
Prepaid Expenses -0- -0-
---------- ---------
Total current assets 122,849 152,264
PROPERTY AND EQUIPMENT
Leasehold Improvements 77,546 335,305
Furniture and Equipment 61,936 270,927
Equipment Not in Use 5,000 5,000
---------- ---------
144,482 611,232
Less Accumulated Depreciation ( 79,479) (180,326)
---------- ---------
65,003 430,906
OTHER ASSETS
Franchise Rights (Net) 47,975 50,000
Other Investments 59,099 29,881
Organization Costs (Net) 11,427 14,543
Deposits 400 30,624
Receivable from Related Parties 53,954 53,954
---------- ---------
172,835 179,002
---------- ---------
TOTAL ASSET $ 360,707 $ 762,172
========== =========
</TABLE>
See Accompanying Notes
-2-
<PAGE> 3
MAGNOLIA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ ------------
(unaudited)
LIABILITIES AND STOCKHOLDER'S
EQUITY
<S> <C> <C>
CURENT LIABILITIES
Accounts Payable $ 477,508 367,262
Accrued Expense 59,172 111,210
Reserve for Closed Stores 31,717 210,864
Notes Payable 510,488 341,758
----------- ----------
TOTAL CURRENT LIABILITIES 1,078885 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; 50,000,000 shares authorized,
36,417,969 and 24,922,118 shares
issued in 1996 and 1995 and
36,413,439 and 24,941,338
outstanding in 1996 and 1995. 364,180 249,271
Additional paid-in capital 4,850,182 4,601,831
Retained Earnings (Deficit) (5,933,838) (5,121,322)
----------- ----------
(716,976) (267,720)
Less Treasury stock - 4,530
Shares at Cost 1,202 1,202
----------- ----------
(718,178) (268,922)
----------- ----------
TOTAL LIABILITIES ABD STOCK- $ 360,707 762,172
=========== ==========
HOLDERS EQUITY
</TABLE>
See Accompanying Notes
-3-
<PAGE> 4
MAGNOLIA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
September 30 September 30
------------------------ --------------------------
1996 1995 1996 1995
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES
Food and beverage sales $ 257,265 $ 614,034 $ 1,079,389 $2,199,059
Interest and Other 265 292 344 23,324
--------- ---------- ---------- ----------
Total Operating Revenues 257,530 614,326 1,079,733 2,222,383
COSTS AND EXPENSES
Cost of sales 96,919 209,613 380,650 793,194
Restaurant operating 125,186 366,105 707,188 1,307,285
General and administrative 88,364 198,416 287,409 426,828
Interest 22,150 6,018 48,873 18,663
Depreciation and amortization 13,168 36,703 64,881 129,694
Loss on Restaurant Sale 200,963 14,869 200,963 120,891
Loan Renewal/Incentive 202,285 -0- 202,285 -0-
--------- ---------- ---------- ----------
Total Costs & Expenses 749,035 831,724 1,892,249 2,796,555
Net Income (Loss) (491,505) (217,398) (812,516) (574,172)
Income (Loss) per Common Share (0.02) (0.01) (0.03) (0.03)
Average number of common
shares outstanding 32,584,197 19,684,426 28,754,955 18,932,759
</TABLE>
See Accompanying Notes
-4-
<PAGE> 5
MAGNOLIA FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
September 30
-----------------------------
1996 1995
----------- ----------
<S> <C> <C>
Operating Activities
Net Income (Loss) $ (812,516) $ (574,172)
Items not Affecting Cash from
Operating Activities:
Depreciation and amortization 64,881 129,694
Loss on Sale of Restaurant 202,285 120,891
Issuance of Stock for Services & Renewal 304,510 115,320
Changes in Operating Assets &
Liabilities:
Receivables (35,426) (74,305)
Inventories 32,140 40,138
Other Assets 1,006 (21,970)
Payables & Accruals (120,939) (98,111)
Net cash provided (used) in
Operating Activities $ (364,059) $ (362,515)
Investing Activities:
Additions to Property and
Equipment $ ------- $ (15,681)
Acquisition of Investments (16,309) (81,371)
Sale/Return of Investment ------ 100,000
Sale of Equipment 87,178 6,212
----------- ----------
Net cash provided (used) by
investing activities $ 70,869 $ 9,160
Financing Activities:
Proceeds from Notes $ 241,396 $ 250,000
Payments of Notes (31,000) (9,190)
Offering Costs (15,057) (2,691)
Issuance of Common Stock Thru
Exercise of Warrants and Options $ 74,337 $ ------
----------- ----------
Net cash provided (used) by
financing activities $ 269,676 $ 238,119
Increase (Decrease) in Cash $ (23,514) $ (115,236)
Cash - Beginning of Period 78,926 127,243
----------- ----------
Cash - End of Period $ 55,412 $ 12,007
----------- ----------
</TABLE>
See Accompanying Notes
-5-
<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 $249,271 $4,601,831 $(5,121,322) $(1,202) $(268,922)
Offering Costs (15,057) (15,057)
Exercise of Options/Warrants 10,777 63,560 74,337
Stock Issued for Services/Debt 104,132 199,848 303,980
Net Loss (812,516) (812,516)
------ -------- ---------- ----------- ------- ---------
Balance June 30, 1996 $2,500 $364,180 $4,850,182 $(5,933,838) $(1,202) $(718,178)
====== ======== ========== =========== ======= =========
</TABLE>
See accompanying notes
-6-
<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 September 30, 1996 and the consolidated results of operations and the
consolidated statements of cash flows for the six-month period ended September
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.
-7-
<PAGE> 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION
Revenues and Operations
The financial impact of the company's efforts to sell its existing
businesses and concentrate its resources on expanding its City Bites joint
venture are reflected in this quarter's results.
Resources for the three month period reflect operations of three
Skolniks Bagel Bakery Restaurants during July and only one for August and
September versus seven restaurants in the same period in 1995. The two Ohio
based Skolniks were sold during the quarter.
The company also sold its investment/ownership in the recently opened
Texas ice house Restaurant to an Oklahoma City based investment group.
For the quarter, cost of sales for the operating restaurants were
consistent with previous results as were operating expenses. However, results
reflected a (one-time) $200,963 loss on the sale of existing restaurants plus a
cumulative corporate (one-time) charge of $202,285 for shares used as loan
incentives for working capital. These one time costs of $403,248 of the
$491,505 total loss for the actual quarter compare favorably when reduced to an
ordinary loss of $88,357 for the 1996 quarter versus a $217,398 loss for the
same period last year. Depreciation and amortization for the 96 quarter was
$13,168 and $36,703 for the 1995 period.
Liquidity
Working capital at September 30, 1996 was a deficit of $956,036
compared to a deficit of $878,830 at December 1995. The deficit increase is
due in part to the issuance of short term debt.
-8-
<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.
(27) Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the
quarter.
ITEM 1. LEGAL PROCEEDINGS
NONE
-9-
<PAGE> 10
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: November 20, 1996 By: /s/ JOSEPH J. JOHNSTON
------------------------ -------------------------------
Joseph J. Johnston
President and
Chief Financial Officer
-10-
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
EX-11 - Statement re: computation of earnings per share
EX-27 - Financial Data Schedule
</TABLE>
-11-
<PAGE> 1
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------------- ---------------------------
1996 1995 1996 1995
------------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Net income (loss) for computing
earnings per common share $ (491,505) $ (217,398) $ (812,516) (574,172)
Weighted average number of
common shares outstanding
during each period without
dilution 32,584,197 19,684,426 28,754,955 18,932,759
Addition from assumed exercise
of Common Stock warrants 245,000 1,120,000 245,000 1,120,000
Addition from assumed
conversion of Preferred Stock 300,000 300,000 300,000 300,000
-------------- ---------- ------------ -----------
33,129,197 21,104,426 29,299,955 20,352,759
============== ========== ============ ===========
Net income per common share
Without Dilution $ (0.02) $ (0.01) $ (0.03) $ (0.03)
Fully diluted $ (0.02) $ (0.01) $ (0.03) $ (0.03)
</TABLE>
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 55,412
<SECURITIES> 0
<RECEIVABLES> 3,838
<ALLOWANCES> 0
<INVENTORY> 15,108
<CURRENT-ASSETS> 122,849
<PP&E> 144,482
<DEPRECIATION> 79,479
<TOTAL-ASSETS> 360,707
<CURRENT-LIABILITIES> 1,078,885
<BONDS> 0
0
2,500
<COMMON> 364,180
<OTHER-SE> (1,084,858)
<TOTAL-LIABILITY-AND-EQUITY> 360,707
<SALES> 1,079,389
<TOTAL-REVENUES> 1,079,733
<CGS> 380,650
<TOTAL-COSTS> 1,843,376
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,873
<INCOME-PRETAX> (812,516)
<INCOME-TAX> 0
<INCOME-CONTINUING> (812,516)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (812,516)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
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