<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1997
Commission file No. 0-15320
The Fresh Juice Company, Inc.
(Exact name of registrant as specified in its charter)
Delaware 11-2771046
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
35 Walnut Avenue, Suite 4
Clark, New Jersey 07066
(Address of principal Executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 396-1112
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 / /
The number of shares of $.01 par value Common Stock outstanding as of July 14,
1997 was 6,467,731.
<PAGE> 2
Part I
Item 1. Financial Statements
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 1997 AND NOVEMBER 30, 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 243,826 $ 133,768
Trade accounts receivable 3,869,030 2,236,781
Inventories 3,259,299 1,759,200
Current portion of notes receivable - stockholders 15,614 --
Prepaid and other current assets 149,656 296,007
----------- -----------
Total Current Assets 7,537,425 4,425,756
Property, Plant and Equipment, at Cost:
Land 30,000 30,000
Building and leasehold improvements 3,005,344 1,740,229
Equipment 5,625,437 3,137,411
Molds 279,354 224,333
Vehicles 314,056 143,358
----------- -----------
9,254,191 5,275,331
Less accumulated depreciation and amortization 2,868,480 820,646
----------- -----------
Net Property, Plant and Equipment 6,385,711 4,454,685
Excess Cost Over Fair Values of Net Assets Acquired, Net of
Accumulated Amortization of $329,912 at May 31, 1997 and $126,748
at November 30, 1996 7,778,574 6,110,947
Trademarks, Patents and Other Intangibles, Net of Accumulated Amortization
of $54,759 at May 31, 1997 and $23,108 at November 30, 1996 497,136 140,084
Notes Receivable - Stockholders, Net of Current Portion 220,369 --
Other Assets 67,988 150,000
----------- -----------
TOTAL ASSETS $22,487,203 $15,281,472
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable to bank $ 1,291,000 $ 705,000
Current installments of obligations under capital lease 27,081 --
Current installments of long-term debt 565,542 260,070
Accounts payable and accrued expenses 3,666,769 2,836,582
Current installments of notes payable - related parties 583,640 --
Income taxes payable 246,214 --
----------- -----------
Total Current Liabilities 6,380,246 3,801,652
Obligations Under Capital Lease, Net of Current Installments 62,317 --
Long-Term Debt, Net of Current Installments 1,974,109 1,524,562
Notes Payable - Related Parties, Net of Current Installments 1,921,126 --
Deferred Income Taxes 97,228 34,000
Deferred Building Rent 141,378 --
Shareholders' Equity:
Series preferred stock, par value $10; authorized 7,000,000 shares; none issued -- --
Common stock, par value $.01; authorized 30,000,000 shares; issued 6,679,669
shares at May 31, 1997 and 6,062,000 shares at November 30, 1996; outstanding
6,467,731 shares at May 31, 1997 and 5,850,062 shares at November 30, 1996 66,797 60,620
Additional paid-in capital 9,334,039 8,583,490
Retained earnings 2,793,256 1,560,441
----------- -----------
12,194,092 10,204,551
Less cost of common shares held in treasury: 211,938 shares at May 31, 1997
and November 30, 1996 283,293 283,293
----------- -----------
Total Shareholders' Equity 11,910,799 9,921,258
----------- -----------
Commitments and Contingency
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $22,487,203 $15,281,472
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net Sales $20,836,509 $7,779,639
Cost of Goods Sold 14,696,150 5,649,215
----------- ----------
Gross Profit 6,140,359 2,130,424
Selling, General and Administrative Expenses 4,397,520 1,906,123
----------- ----------
Earnings From Operations 1,742,839 224,301
Interest Income 14,123 27,976
Interest Expense (275,351) (65,285)
Other Income (Expense) 31,679 4,962
----------- ----------
Earnings Before Income Taxes 1,513,290 191,954
Income Taxes 280,475 81,000
----------- ----------
Net Earnings 1,232,815 110,954
Retained Earnings, Beginning of Period 1,560,441 2,489,484
----------- ----------
Retained Earnings, End of Period $ 2,793,256 $2,600,438
=========== ==========
Net Earnings Per Common Share $ .19 $ .03
=========== ==========
Weighted Average Number of Common and Common
Equivalent Shares Outstanding 6,540,136 3,982,231
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MAY 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Net Sales $11,458,916 $5,566,796
Cost of Goods Sold 8,000,214 4,383,700
----------- ----------
Gross Profit 3,458,702 1,183,096
Selling, General and Administrative Expenses 2,354,390 829,167
----------- ----------
Earnings From Operations 1,104,312 353,929
Interest Income 8,952 14,218
Interest Expense (136,927) (32,643)
Other Income (Expense) 22,698 (459)
----------- ----------
Earnings Before Income Taxes 999,035 335,045
Income Taxes 278,875 80,336
----------- ----------
Net Earnings 720,160 254,709
Retained Earnings, Beginning of Period 2,073,096 2,345,729
----------- ----------
Retained Earnings, End of Period $ 2,793,256 $2,600,438
=========== ==========
Net Earnings Per Common Share $ .11 $ .06
=========== ==========
Weighted Average Number of Common and Common
Equivalent Shares Outstanding 6,535,704 4,373,990
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MAY 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 1,232,815 $ 110,954
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 723,951 214,339
Noncash income tax charge 51,261 --
Deferred building rent 2,876 --
Changes in assets and liabilities, net of assets acquired
and liabilities assumed:
Trade accounts receivable (821,396) (496,964)
Inventories (1,007,799) (623,877)
Prepaid and other current assets 186,968 (48,623)
Other assets 126,356 (1,830)
Accounts payable and accrued expenses (594,501) 449,247
Income taxes payable 246,214 79,983
----------- -----------
Net Cash Provided By (Used In) Operating Activities 146,745 (316,771)
Cash Flows From Investing Activities:
Installments from notes receivable -- 30,000
Increase in notes receivable - stockholders (7,983) --
Acquisitions of property, plant and equipment (170,241) (856,994)
Acquisitions of trademarks and patents -- (1,245)
Acquisition of Hansen's Juices, Inc., net of cash acquired (37,756) --
Cash acquired in The Ultimate Juice Company, Inc. merger -- 70,936
----------- -----------
Net Cash Used In Investing Activities (215,980) (757,303)
Cash Flows From Financing Activities:
Proceeds from notes payable to bank 586,000 --
Repayment of long-term debt (349,412) --
Repayment of capital lease obligations (19,040) --
Repayment of notes payable - related parties (38,255) (22,000)
----------- -----------
Net Cash Provided By (Used In) Financing Activities 179,293 (22,000)
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents 110,058 (1,096,074)
Cash and Cash Equivalents at Beginning of Period 133,768 1,998,063
----------- -----------
Cash and Cash Equivalents at End of Period $ 243,826 $ 901,989
=========== ===========
SUPPLEMENTAL CASH FLOW AND NONCASH INVESTING AND FINANCING ACTIVITIES
INFORMATION:
Income taxes paid $ 3,757 $ 65,285
Interest paid $ 265,677 $ 36,271
Fair value of assets acquired $ 6,139,034 $ 4,437,535
Debt and liabilities assumed 5,382,308 590,035
----------- -----------
Fair value of common stock issued $ 756,726 $ 3,847,500
=========== ===========
</TABLE>
<PAGE> 6
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997 AND NOVEMBER 30, 1996
(UNAUDITED)
(1) The consolidated financial information of The Fresh Juice Company, Inc.
and Subsidiaries (the Company), included herein has been prepared by
the Company and is unaudited; however, such information reflects all
adjustments (consisting solely of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair statement of
the financial position, results of operations, and cash flows for the
interim periods to which the report relates. The results of operations
for the periods ended May 31, 1997 are not necessarily indicative of
the operating results which may be achieved for the full year. All
material intercompany accounts and transactions have been eliminated in
consolidation.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto included
in the Company's November 30, 1996 consolidated financial statements.
(2) Inventories at May 31, 1997 and November 30, 1996 consist of the
following:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Raw Materials $ 880,283 $ 375,351
Finished goods 2,379,016 1,383,849
---------- ----------
$3,259,299 $1,759,200
========== ==========
</TABLE>
(3) Hansen's Juices, Inc. (Hansen's) which the Company acquired as
of December 2, 1996 (see Note 4), has been named as one of many
defendants in a lawsuit filed by the Franchise Holders of Southland
Corporation (Southland), against Southland and a large number of the
purveyors to the franchisees of Southland, i.e., 7-Eleven stores.
Hansen's was one of the purveyors that has been sued in connection
with that lawsuit. However, there is only one cause of action which
pertains to Hansen's, and Hansen's is coupled in that count with
Southland, the Coca-Cola Company and Pepsi-Cola Company. The basis of
the cause of action is that each of the named purveyors conspired to
fix prices on soft drinks by trying to set the franchisees' retail
price of their respective products in order for the franchisee(s) to
obtain a discount off the wholesale price. In the count in which
Hansen's was named, the plaintiffs seek total damages in excess of
$50,000. The case was filed in September 1993 and is venued in the
Superior Court of the State of California for the County of Alameda.
On March 12, 1997, the Superior Court of the State of California for
the County of Alameda entered an Order Granting Summary Adjudication
in favor of Hansen's, however, on June 19, 1997, the Franchise
Holders of Southland filed an appeal seeking to overturn the Order
Granting Summary Adjudication in favor of Hansen's. Management of the
Company intends to vigorously oppose the appeal and believes that the
ultimate resolution of this matter will not have a material impact on
the financial position of the Company.
A former employee of Clear Springs Citrus, Inc. has filed a lawsuit
for breach of his employment agreement. The plaintiff seeks total
damages in excess of $50,000. Management of the Company believes
the ultimate resolution of this matter will not have a material
impact on the financial position of the Company.
(4) During the fourth quarter of fiscal 1996, the Company made adjustments
to its original purchase accounting relative to The Ultimate Juice
Company, Inc. ("Ultimate") merger, recorded during the second quarter
of fiscal 1996. These adjustments were: (a) reducing the value of the
company's common stock exchanged for the stock of Ultimate and (b)
capitalizing as acquisition costs certain previously expensed items
such a professional fees, etc. The following pro forma table reflects
the effect of these adjustments on the previously reported three month
and six month periods ended May 31 of fiscal 1996:
<TABLE>
<CAPTION>
Three Months Six Months
Ended Ended
May 31, 1996 May 31, 1996
------------ ------------
<S> <C> <C>
Earnings From Operations $420,329 $277,238
Net Earnings $304,174 $160,798
Net Earnings Per Common Share .07 .04
</TABLE>
<PAGE> 7
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997 AND NOVEMBER 30, 1996
(UNAUDITED)
The Company finalized their purchase accounting relative to the
Ultimate merger during the second quarter of the fiscal 1997 with no
additional adjustments from that reflected in the November 30,
1996 Form 10-KSB.
Effective December 2, 1996, the Company acquired all of the outstanding
capital stock of Hansen's in exchange for $90,000 in cash, 597,443
shares of the Company's common stock, warrants to purchase 300,000
shares of the Company's common stock for $3.00 per share and the
assumption of Hansen's debt. This merger has been accounted for as a
purchase. Simultaneously with the merger, the Company also
restructured a portion of Hansen's existing debt obligations owed to
former Hansen's stockholders and in connection therewith delivered
$60,000 in cash and 20,226 shares of the Company's common stock to a
former Hansen's stockholder.
The estimated fair value of Hansen's assets and liabilities at the date
of acquisition is presented as follows:
<TABLE>
<CAPTION>
<S> <C>
Cash $ 112,244
Trade accounts receivable 810,853
Inventory 492,300
Prepaid expenses 40,617
Notes receivable - stockholders 228,000
Property, plant and equipment 2,249,937
Goodwill, representing excess of cost over
estimated fair values of net assets acquired 1,922,036
Intangible assets 388,703
Other assets 44,344
Notes payable to bank (139,926)
Long-term debt (964,505)
Accounts payable and accrued expenses (1,424,688)
Obligations under capital lease (108,438)
Notes payable - related parties (2,543,021)
Deferred income taxes (63,228)
Deferred building rent (138,502)
----------
Total Purchase Price $ 906,726
==========
</TABLE>
In the above acquisition, the common stock delivered as consideration
is unregistered and contains certain restrictions as well as having
several large blocks of stock being issued to certain sellers in the
transaction. Management is in the process of evaluating the fair
values of the assets acquired and liabilities assumed, and has made
preliminary assessments of the fair values of assets acquired and
liabilities assumed in connection with the Hansen's merger. Management
of the Company upon receiving advice from its investment banker, has
made an assessment of the fair value of the common stock issued in
connection with the Hansen's acquisition at the approximate date of the
merger agreement which fair value approximates 70% of the publicly
traded market price.
In connection the Hansen's merger, management's preliminary assessments
of fair values for assets acquired and liabilities assumed to date
result in tentative allocations of amounts to the excess of costs over
the fair values of net assets acquired. Management continues to be in a
discovery and assessment period, and is evaluating the possible
existence of other identifiable intangible assets that may exist. No
adjustments have been made to the consolidated financial statements
with respect to a final determination as to the existence and fair
values of other identifiable intangible assets, should any exist. The
final fair values of property, plant and equipment acquired in the
merger will be determined by management upon the completion of the
appraisal process.
<PAGE> 8
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997 AND NOVEMBER 30, 1996
(UNAUDITED)
In connection with the Hansen's merger, the Company issued warrants as
part of the merger consideration to sellers, and certain bank debt and
debt to former shareholders was assumed. Management is in the process of
evaluating the fair value of the warrants issued and debt assumed. No
adjustments have been included in the consolidated financial statements
for these matters.
The following table presents selected financial information (unaudited)
for the Company and Ultimate, Clear Springs Citrus, Inc. ("Clear
Springs") and Hansen's on a pro-forma basis assuming the four companies
had been combined for the six months ended May 31, 1996. Pro-forma
results for the six months include the results of the Company for the six
months ended May 31, 1996 combined with the results of Ultimate for the
four month period December 1, 1995 to March 31, 1996 and the results of
Clear Springs and Hansen's for the six month periods ended June 30, 1996,
which are periods prior to their acquisition by the Company. The pro
forma financial information does not necessarily reflect the results of
operations that would have occurred had the Company, Ultimate, Clear
Springs and Hansen's constituted a single entity during such period.
Pro-forma results include necessary pro-forma adjustments:
<TABLE>
<CAPTION>
<S> <C>
Net Sales $21,433,729
Net Earnings $ 163,787
Net Earnings Per Common Share $ .03
</TABLE>
Such pro-forma data reflects certain preliminary adjustments to the fair
value of the assets purchased since, as indicated above, the Company has
not had an opportunity to obtain all of the appraisals or other
independent verifications of the fair value of the assets purchased.
(5) The Financial Accounting Standards Board issued Statement No. 123,
Accounting for Stock-Based Compensation (SFAS No. 123). Under this new
standard, a new fair value based method of accounting for stock-based
compensation arrangements with employees is established. Entities may
continue to use the Opinion 25 method or adopt the SFAS No. 123 fair
value based method. The Company adopted this standard effective December
1, 1996. As a result, the Company has and will continue to use the
Opinion 25 method, and therefore SFAS No. 123 requires footnote
disclosure in the annual financial statements of proforma net income and
earnings per share information as if the fair value based method had been
adopted.
The Financial Accounting Standards Board issued Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed (SFAS No. 121). This new standard requires the
assessment of the recoverability of long-lived assets and certain
intangibles and related goodwill and recognition of any impairment
losses. The Company adopted this statement effective December 1, 1996.
The adoption of this standard did not have a material effect on the
Company's consolidated financial statements.
<PAGE> 9
THE FRESH JUICE COMPANY, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997 AND NOVEMBER 30, 1996
(UNAUDITED)
In February 1997, the Financial Accounting Standards Board issued SFAS
128, "Earnings per Share," and SFAS 129, "Disclosure of Information about
Capital Structure." SFAS 128, which is effective for fiscal years ending
after December 15, 1997, including interim periods, requires the
presentation of basic and diluted earnings per share ("EPS"). Basic EPS,
which replaces primary EPS, excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings
of the entity. Diluted EPS is computed similarly to fully diluted EPS
under the existing rules. SFAS 128 requires restatement of all prior
period EPS amounts presented after the effective date. The Company will
adopt the provisions of SFAS 128 in fiscal 1998; however, the impact of
adoption has not yet been determined. SFAS 129, which is also effective
for fiscal years ending after December 15, 1997, establishes standards
for disclosing information about an entity's capital structure. The
Company will adopt the disclosure requirements of SFAS 129 during the
fiscal year ending November 30, 1998.
(6) The Company's provision for income taxes for the six months ended
May 31, 1997 reflects the benefits of a reduction in its deferred tax
asset valuation account of approximately $357,000, resulting from the
utilization of net operating losses in effect as of November 30, 1996. As
of November 30, 1996, these net operating loss carryforwards were fully
offset by a valuation allowance. In addition, the tax benefit of
pre-acquisition net operating losses pertaining to Clear Springs, which
have been utilized during the six months ended May 31, 1997, have been
credited to excess cost of fair values of net assets in the amount of
$51,261.
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
As more fully discussed in Item 1 of the Annual Report on Form 10-KSB,
the Company acquired both The Ultimate Juice Company, Inc. ("Ultimate") and
Clear Spring Citrus, Inc. ("Clear Springs") during the year ended November 30,
1996. In addition, as more fully discussed in Note 4 to the Company's
Consolidated Financial Statements contained in this Quarterly Report on Form
10-QSB, the Company acquired Hansen's Juices, Inc. ("Hansen's") by merger during
the quarter ended February 28, 1997. The merger with Ultimate (the "Ultimate
Merger") became effective on April 1, 1996; the merger with Clear Springs (the
"Clear Springs Merger") became effective on September 1, 1996; and the merger
with Hansen's (the "Hansen's Merger") became effective on December 2, 1996.
Since (a) the Clear Springs Merger and the Hansen's Merger each became effective
subsequent to May 31, 1996 and (b) the Ultimate Merger become effective one
month into the quarter ended May 31, 1996, the Company's consolidated statements
of operations for the quarter ended May 31, 1996, consisted of the Company's
activities, inclusive of only two months of the operations of Ultimate and
exclusive of the operations of Clear Springs and Hansen's, whereas the Company's
consolidated statements of operations for the quarter ended May 31, 1997 consist
of the Company's activities, inclusive of the operations of each of the acquired
entities described above.
Primarily as a result of the Ultimate Merger, the Clear Springs Merger
and the Hansen's Merger (hereinafter the "Acquisitions"), the Company's net
sales have increased to $20,836,509 for the six months ended May 31, 1997,
representing a 168% increase over the Company's net sales of $7,779,639 for the
six months ended May 31, 1996. For the quarter ended May 31, 1997, net sales
have increased to $11,458,916 or 106% over net sales of $5,566,796 for the
corresponding quarter of the previous year.
As a result of the increase in net sales due to the Acquisitions, gross
profit, has increased to $6,140,359 for the six months ended May 31, 1997,
representing a 188% increase over the Company's gross profit of $2,130,424 for
the six months ended May 31, 1996. For the quarter ended May 31, 1997, gross
profit increased to $3,458,702 from $1,183,096 for the corresponding quarter of
the previous year, representing a 192% increase.
In addition to a proportionate increase in cost of goods sold relating
to increased sales, cost of goods sold also increased due to a change in the
product mix sold by the Company. Prior to April 1, 1996, the Company was
primarily a distributor of frozen fresh squeezed juices. However, as a result of
the Acquisitions and the Company's acquisition and renovation of its production
facility in Winter Haven, Florida (the "Florida Plant"), the Company's revenue
mix has changed, and the Company is now a manufacturer and distributor of fresh
squeezed frozen and non-frozen juices and other juice and non carbonated
beverages, with the majority of the Company's revenues derived from the sale of
fresh, non-frozen juices.
The Company's selling, general and administrative expenses have also
increased as a result of the Acquisitions and the operation of the Florida Plant
and Hansen's California facility. Selling, general and administrative
expenses, have increased to $4,397,520 for the six months ended May 31, 1997,
representing a 131% increase over the Company's selling, general and
administrative expenses of $1,906,123 for the six months ended May 31, 1996. For
the quarter ended May 31, 1997, the Company's selling, general and
administrative expenses
<PAGE> 11
increased to $2,354,390 from $829,167 for the corresponding quarter of the
previous year, representing a 184% increase.
The interest paid on the outside financing obtained in connection with
equipping the Florida Plant, the assumption of debt from the Hansen's Merger, as
well as the Company's $2,500,000 working capital line of credit, has caused
interest expense to increase by $210,066 to $275,351 for the six months ended
May 31, 1997 as compared to $65,285 for the six months ended May 31, 1996. For
the quarter ended May 31, 1997, interest expense increased $104,284 to $136,927
as compared to $32,643 for the quarter ended May 31, 1996.
FINANCIAL CONDITION
As a result of the Hansen's Merger, increased sales and the substantial
completion of the season in which the Company manufactures and builds up its
fresh frozen inventory, both the current and total assets of the Company have
increased to $7,537,425 and $22,487,203, respectively, as of May 31, 1997, as
compared to $4,425,756 and $15,281,472, respectively, as of November 30, 1996.
Specifically, the Company's trade accounts receivable and inventories have
increased to $3,869,030 and $3,259,299, respectively, as of May 31, 1997, as
compared to $2,236,781 and $1,759,200, respectively, as of November 30, 1996.
Primarily as a result of the Hansen's Merger, the Company's balances
for property, plant and equipment have increased to $6,385,711
as of May 31, 1997 as compared to $4,454,685 as of November 30, 1996.
Similarly, the Hansen's Merger has resulted in an increase in excess
cost over fair values of net assets acquired, net of accumulated amortization,
to $7,778,574 as of May 31, 1997 as compared to $6,110,947 as of November 30,
1996, as well as an increase in trademarks, patents and other intangibles, net
of accumulated amortization, to $497,136 as of May 31, 1997 as compared to
$140,084 as of November 30, 1996.
Accounts payable and accrued expenses have increased to $3,666,769 as
of May 31, 1997 as compared to $2,836,582 as of November 30, 1996. This increase
results from the consolidation of the Hansen's accounts payable and accrued
expenses into the Company's financial statements. The Hansen's merger and the
assumption of the Hansen's debt associated therewith, have resulted in an
increase in current installments of long term debt to $565,542 as of May 31,
1997 as compared to $260,070 as of November 30, 1996, as well as an increase in
notes payable-related parties to $2,504,766 as of May 31, 1997 as compared to $0
as of November 30, 1996. Additional draws on the Company's credit line used to
finance its operations and pay off existing debts of its subsidiaries have
resulted in an increase in notes payable to bank to $1,291,000 as of May 31,
1997 as compared to $705,000 as of November 30, 1996.
The Hansen's merger and the issuance of additional shares of the
Company's common stock in connection therewith have resulted in an increase in
paid-in capital to $9,334,039 as of May 31, 1997 as compared to $1,291,000 as of
November 30, 1996.
LIQUIDITY
The Company has working capital of $1,157,179 at May 31, 1997 as
compared to $624,104 at November 30, 1996. The Company requires capital to
support its capital improvements and the level of inventory required to meet
current demand as well as expected future increases in demand for its products.
To provide additional liquidity, in August 1996,
<PAGE> 12
the Company obtained a $2,500,000 line of credit with Fleet Bank, N.A.. At May
31, 1997, the amount drawn on the line was $1,291,000, leaving $1,209,000
available as of such date. As of July 14, 1997, approximately $1,475,000 of the
line of credit is still available, depending upon qualified levels of accounts
receivable and inventories as defined in the Loan Agreement. The Company
typically invests approximately $2.5 million from January through June to
replenish its yearly fresh-frozen juice inventory. The Company believes that it
has sufficient liquidity to conduct its business and to build its fresh-frozen
inventory during the remainder of the Florida harvest season to meet the
Company's current customers' demand for its fresh-frozen products. A lack of
availability of quality fruit and higher cost of citrus would hamper the
Company's ability to maintain its rate of growth and its current gross profit
level. In connection with the Hansen's Merger, the Company assumed the debt
obligations of Hansen's. The Company believes that the results of its operations
(inclusive of Hansen's), will be sufficient to meet these additional debt
obligations.
As a result of the Hansen's Merger and the Company's operating results
for the fourth fiscal quarter of the year ended November 30, 1996, at May 31,
1997, the Company was in violation of the Debt to Worth Ratio and the Minimum
Debt Service Coverage Ratio financial covenants in its new working capital
credit facility with Fleet Bank, N.A. In July, the Company obtained from Fleet
Bank, N.A. a waiver of both covenants until the test date at the end of the
third fiscal quarter. Management is presently working with Fleet Bank, N.A. to
permanently amend such covenants to bring the Company into compliance. The
Company's ability to meet its financial covenants in the future is dependent
upon future operating results.
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously disclosed in the Company's Annual Report on Form 10-KSB,
the Company's subsidiary, The Fresh Juice Company of California, Inc.
(Hansen's), has been named as one of many defendants in a lawsuit filed by the
Franchise Holders of Southland Corporation ("Southland") against Southland and
a large number of the purveyors to the franchisees of Southland, i.e., 7-Eleven
stores. Hansen's was one of the purveyors that has been sued in connection with
that lawsuit. However, there is only one cause of action which pertains to
Hansen's, and Hansen's is coupled in that count with Southland, The Coca-Cola
Company and Pepsi-Cola Company. The basis of the cause of action is that each
of the named purveyors conspired to fix prices on soft drinks by trying to set
the franchisees' retail price of their respective products in order for the
franchisee(s) to obtain a discount off the wholesale price. In the count in
which Hansen's was named, the plaintiffs seek total damages in excess of
$50,000.00. The case was filed in September, 1993 and is venued in the Superior
Court of the State of California for the County of Alameda. On March 12, 1997,
the Superior Court of the State of California for the County of Alameda entered
an Order Granting Summary Adjudication in favor of Hansen's, however, on June
19, 1997, the Franchise Holders of Southland filed an appeal seeking to
overturn the Order Granting Summary Adjudication in favor of Hansen's.
Management of the Company intends to vigorously oppose the appeal and
believes that the ultimate resolution of this matter will not have a material
impact on the financial position of the Company.
As previously disclosed in the Company's Annual Report on Form 10-KSB,
Fresh Pik't Natural Foods, Inc., a wholly owned subsidiary of the Company, was
named as a defendant in a legal matter seeking damages in excess of $250,000,
and the matter had been settled pending court approval of the settlement. On
or about June 20, 1997, the settlement was approved by the court, and the
Company has begun making the installment payments required under the terms of
the settlement.
On or about May 12, 1997, Parley R. Blackwelder, a former employee of
Clear Springs, filed a lawsuit against Clear Sprints, alleging a breach of his
employment agreement with Clear Springs and seeking in excess of $50,000 in
damages. Management of the Company intends to vigorously defend against this
lawsuit and believes that the ultimate resolution of this matter will not have
a material impact on the financial position of the Company.
<PAGE> 14
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE FRESH JUICE COMPANY, INC.
Dated: July 15, 1997 By: /s/ Steven M. Bogen
--------------------
Steven M. Bogen
Co-Chairman of the Board and
Chief Executive Officer
(principal executive officer)
Dated: July 15, 1997 By: /s/ Mark Feldman
-----------------
Mark Feldman, Chief Financial
Officer (principal financial officer and
principal accounting officer)
<PAGE> 16
EXHIBIT INDEX
Exhibit
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> MAY-31-1997
<CASH> 243,826
<SECURITIES> 0
<RECEIVABLES> 3,869,030
<ALLOWANCES> 0
<INVENTORY> 3,259,299
<CURRENT-ASSETS> 7,537,425
<PP&E> 9,254,191
<DEPRECIATION> 2,868,480
<TOTAL-ASSETS> 22,487,203
<CURRENT-LIABILITIES> 6,380,246
<BONDS> 0
0
0
<COMMON> 66,797
<OTHER-SE> 11,910,799
<TOTAL-LIABILITY-AND-EQUITY> 22,487,203
<SALES> 20,836,509
<TOTAL-REVENUES> 20,882,311
<CGS> 14,696,150
<TOTAL-COSTS> 19,093,670
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 275,351
<INCOME-PRETAX> 1,513,290
<INCOME-TAX> 280,475
<INCOME-CONTINUING> 1,232,815
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,232,815
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
