SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-Q
AMENDED
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended August 29, 1998 Commission File 0-15696
PIEMONTE FOODS, INC.
(Exact name of registrant as specified in its charter)
South Carolina 57-0626121
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(State or other jurisdiction of I.R.S. Employer
incorporation of organization) Identification
400 Augusta Street, Greenville, South Carolina 29601
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(Address of principal executive offices)
Registrant's telephone number, including area code: (864) 242-0424
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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
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The number of shares of common stock outstanding as of September 30, 1998 was
1,543,294
<PAGE>
PIEMONTE FOODS, INC.
INDEX TO FORM 10-Q
Part I Financial Information
Item 1. Financial Statements, unaudited
Consolidated Balance Sheets - August 29, 1998, and
May 30, 1998
Consolidated Statements of Operations for the First
Quarter ended August 29, 1998, and August 30, 1997.
Consolidated Statements of Cash Flows for the First
Quarter ended August 29, 1998, and August 30, 1997.
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Part II Other Information
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27. Financial data schedule
<PAGE>
PIEMONTE FOODS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Assets August 29,1998 May 30, 1998
- ----------------------------------------------------------------------------------------------------------------------
Current Assets
<S> <C> <C>
Cash & cash equivalents $ 16,550 $ 184,009
Accounts receivable, net 852,274 1,058,340
Inventories 837,659 662,904
Prepaid expenses and other current assets 144,205 121,135
- ----------------------------------------------------------------------------------------------------------------------
Total Current Assets 1,850,688 2,026,388
- ----------------------------------------------------------------------------------------------------------------------
Property, Plant & Equipment, Net 3,463,588 3,650,726
Deferred Charges, Intangible and Other Assets
Excess of cost over fair value of net assets acquired 57,023 60,015
Total Assets $5,371,299 $5,737,129
======================================================================================================================
Liabilities and Stockholder's Equity
- ----------------------------------------------------------------------------------------------------------------------
Current Liabilities
Current portion of long-term debt in default $2,131,291 $2,131,291
Accounts payable 2,075,414 2,127,017
Accrued expenses 605,948 667,274
- ----------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 4,812,653 4,925,582
- ----------------------------------------------------------------------------------------------------------------------
Stockholder's Equity
Common Stock 15,433 15,433
Capital in excess of stated value of common stock 2,902,110 2,902,110
Retained earnings (deficit) (2,358,897) (2,105,996)
- ----------------------------------------------------------------------------------------------------------------------
Total Stockholder's Equity 558,646 811,547
- ----------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholder's Equity $5,371,299 $5,737,129
======================================================================================================================
</TABLE>
See accompanying notes to Financial Statements
<PAGE>
PIEMONTE FOODS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended August 29, 1998 and August 30, 1997
<TABLE>
<CAPTION>
FY 99 FY 98
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Sales $3,404,428 $4,676,967
Operating Expenses
Cost of Goods Sold 2,682,393 3,668,561
Selling, general and administrative 964,211 1,194,919
- ----------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 3,646,604 4,863,480
- ----------------------------------------------------------------------------------------------------------------------
Operating Loss (242,176) (186,513)
Other Expenses
Interest expense (net) 45,238 43,851
(Gain)/Loss on disposal of assets 0 (5,000)
Other income (34,513) (6,640)
- ----------------------------------------------------------------------------------------------------------------------
Total Other Expenses 10,725 32,211
- ----------------------------------------------------------------------------------------------------------------------
Income/(Loss) Before Income Taxes (252,901) (218,724)
Income Tax Benefit 0 0
- ----------------------------------------------------------------------------------------------------------------------
Net Loss ($252,901) ($218,724)
======================================================================================================================
Average Number of Shares Outstanding 1,543,294 1,561,095
Net Loss Per Share ($0.16) ($0.14)
======================================================================================================================
</TABLE>
See accompanying notes to Financial Statements
<PAGE>
PIEMONTE FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended August 29, 1998 and August 30, 1997
<TABLE>
<CAPTION>
FY 99 FY 98
- ----------------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
<S> <C> <C>
Net Income/(Loss) ($252,901) ($218,724)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 190,130 170,319
Decrease (increase) in:
Receivables 206,066 396,909
Inventories (174,755) (339,577)
Prepaid expenses (23,070) (18,399)
Increase (decrease) in:
Accounts payable (51,603) 1,126,799
Accrued liabilities (61,326) (91,280)
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (167,459) 1,026,047
- ----------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Purchases of property, plant and equipment 0 0
Proceeds from the sale of property, plant and equipment 0 8,680
- ----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities 0 8,680
- ----------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Repayment of long-term debt 0 (1,099,048)
- ----------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 0 (1,099,048)
- ----------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in cash (167,459) (64,321)
Cash, beginning of period 184,009 591,153
- ----------------------------------------------------------------------------------------------------------------------
Cash, end of period $16,550 $526,832
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to Financial Statements
<PAGE>
PIEMONTE FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 29, 1998
NOTE 1 - PRINCIPLES OF CONSOLIDATION
The accompanying financial statements include the accounts of
Piemonte Foods, Inc. and its wholly-owned subsidiaries, Piemonte
Foods of Indiana, Inc. and Origena, Inc. The consolidated
balance sheet as of August 29, 1998 and the related statements
of operations and cash flows for the three month period then
ended are unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of such financial
statements have been included. Such adjustments consisted only
of normal recurring items.
The financial statements and notes are presented as permitted by
Form 10-Q, and do not contain certain information included in
the company's annual financial statements and notes.
<PAGE>
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At August 29, 1998, working capital was a negative of $2.9
million, the same level as at the beginning of the quarter. This
negative amount includes $2.1 million of long-term debt that is
classified as a current liability. The Company has been unable
to service its bank debt and has been in violation of certain
covenants in its debt agreements.
The Company has also been unable to meet its obligations to
trade creditors in a normal and timely basis and is continuing
negotiations with its creditors to reach agreements with respect
to either discounting the obligations due creditors and/or
delaying payment of such obligations. There can be no assurance
that these negotiations will be successful and, if not, the
Company would have to obtain additional capital or take other
steps to continue its operations on a normal basis in light of
its current shortage of working capital.
Over the past year Piemonte eliminated certain unprofitable
business lines and modified and corrected accounts that were
unprofitable. The product line was simplified and the marketing
of the core product lines was emphasized. The employees were
reduced and personnel upgraded, including recruiting three new
directors to the Board, each with specific expertise in
marketing, sales and operations. Piemonte is now in a position
to grow real unit volume of its core products through marketing
and selling activity, new product introduction and strategically
repositioning key products in the current product line. The
losses of the last two years, however, have eroded capital. The
last and critical step in the reformation process is to restore
a level of capital sufficient to sustain operations. Management
has before it certain preliminary plans involving outside
investment in the Company. Management believes such a
transaction would benefit the Company and its shareholders and
is necessary for the Company to continue in business.
RESULTS OF OPERATIONS
Quarter Ended August 29, 1998 Compared to
Quarter Ended August 30, 1997
Revenues for the First Quarter were $3.4 million, 27% lower than
last year. Most of the decline is attributable to two customers,
one that bought a competitor of the Company and another that
switched to that competitor as its supplier.
Gross margin of 21% for the quarter was consistent with last
year in spite of the revenue decline. The restructuring plan
implemented in the Third Quarter last year, coupled with price
adjustments and cost reductions kept costs in line. Selling,
general and administrative expenses were also reduced as part of
that restructuring plan.
Overall, the loss of $242,901 for the quarter was 16% higher
than the loss of $218,724 last year, due to the fact that cost
reductions did not offset all of the margins lost by the revenue
decline.
<PAGE>
YEAR 2000 COMPLIANCE
Subsequent to year-end the Company changed software packages to
a Y2K compliant package. The Company has not communicated with
its critical external relationships to determine the extent to
which the Company may be vulnerable to such parties' failure to
resolve their own Y2K issues. With the exception of utility and
banking relationships, however, it is not anticipated that these
relationships are material. Where practical, the Company will
assess and attempt to mitigate its risks with respect to the
failure of these entities to be Y2K ready. The effect, if any,
on the Company's results of operations from the failure of such
parties is not readily estimable.
<PAGE>
Part II Item 1 Legal Proceedings
Virgil L. Clark v. Piemonte Foods, Inc. et al: On
October 7, 1998, the Company's former CEO. Virgil L.
Clark filed suit in the Court of Common Pleas,
Greenville, South Carolina, claiming that the
Company terminated his Employment Agreement on
January 29, 1998 without cause. The lawsuit asks for
the payment of wages, trebled, in the amount of
$1,494,231; for actual and punitive damages in the
amount of $2,000,000; and for interest, costs and
attorney's fees. The Company intends to contest the
suit vigorously.
Item 6 Exhibits and Reports on Form 8-K
a) Exhibits required by Item 601 of Regulation S-K
None
b) Reports on Form 8-K
None
Exhibit 27. Financial data schedule
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 hereunto duly authorized.
PIEMONTE FOODS, INC.
Jan. 20, 1999 /s/Mark Fagan
- --------------------- ---------------------------------------
Date Mark Fagan
President and CEO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> AUG-29-1998
<CASH> 16,550
<SECURITIES> 0
<RECEIVABLES> 852,274
<ALLOWANCES> 0
<INVENTORY> 837,659
<CURRENT-ASSETS> 1,850,688
<PP&E> 3,463,588
<DEPRECIATION> (190,130)
<TOTAL-ASSETS> 5,371,299
<CURRENT-LIABILITIES> 4,812,653
<BONDS> 0
0
0
<COMMON> 15,433
<OTHER-SE> 2,902,110
<TOTAL-LIABILITY-AND-EQUITY> 5,371,299
<SALES> 3,404,428
<TOTAL-REVENUES> 3,404,428
<CGS> 2,682,393
<TOTAL-COSTS> 3,646,604
<OTHER-EXPENSES> (34,513)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,238
<INCOME-PRETAX> (252,901)
<INCOME-TAX> 0
<INCOME-CONTINUING> (252,901)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (252,901)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
