U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report under Section 13 or 15 (d) of the
Securities Exchange Act of 1934.
For the quarterly period ended December 31, 1997.
[ ] Transition Report under Section 13 or 15 (d) of the
Exchange Act.
For the transition period from ___________________ to ________________________.
Commission File Number 000-19318
SPARTA FOODS, INC.
(exact name of small business issuer as specified in its charter)
Minnesota 41-1618240
(state or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1565 First Avenue NW, New Brighton, MN 55112
(Address of principal executive offices)
(612) 697-5500
(Issuer's telephone number)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 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 [ ]
State the number of shares outstanding of each of the Issuer's classes of common
equity, as of the latest practicable date:
6,798,637 shares of Common Stock at January 21, 1998.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE>
SPARTA FOODS, INC.
FORM 10-QSB
QUARTER ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheets
at December 31, 1997 and September 30, 1997 3
Condensed Consolidated Statements of
Operations for the three-month periods
ended December 31, 1997 and 1996 4
Condensed Consolidated Statements of
Cash Flows for the three-month periods
ended December 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial
Statements - December 31, 1997 6
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of
Operations
PART II . OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
EXHIBIT INDEX 14
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SPARTA FOODS, INC.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31 September 30
1997 1997
------------------ -------------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash $ 600 $ 600
Accounts receivable, less allowance of $49,500 at each date 901,167 833,467
Inventories:
Finished goods 450,051 566,212
Raw materials and packaging 514,256 531,358
Prepaid expenses 152,995 156,466
--------------------------------------------------------------------------------- ------------------ -------------------
Total current assets 2,019,069 2,088,103
--------------------------------------------------------------------------------- ------------------ -------------------
Property and Equipment 9,039,523 7,488,786
Less accumulated depreciation 2,474,659 2,371,131
--------------------------------------------------------------------------------- ------------------ -------------------
6,564,864 5,117,655
--------------------------------------------------------------------------------- ------------------ -------------------
Other Assets
Restricted cash 437,212 1,893,967
Goodwill, less accumulated amortization of $75,774 and $72,564, respectively 437,598 440,808
Covenants not-to-compete, less accumulated amortization of
$42,935 and $40,772, respectively 67,065 69,228
Rental property held for resale, less accumulated depreciation of $45,953 and
$38,728, respectively 901,329 906,422
Other 435,086 381,162
--------------------------------------------------------------------------------- ------------------ -------------------
2,278,290 3,691,587
================================================================================= ================== ===================
$ 10,862,223 $ 10,897,345
================================================================================= ================== ===================
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Note payable, bank $ 1,213,396 $ 834,209
Current maturities of long-term debt 703,785 700,388
Accounts payable:
Trade 692,436 861,120
Construction 403,399 428,315
Accrued expenses 363,423 536,033
--------------------------------------------------------------------------------- ------------------ -------------------
Total current liabilities 3,376,439 3,360,065
--------------------------------------------------------------------------------- ------------------ -------------------
Long-term Debt, less current maturities 3,996,523 4,051,212
--------------------------------------------------------------------------------- ------------------ -------------------
Stockholders Equity
Preferred Stock, authorized 1,000,000 shares,
no designated par value; none issued -- --
Common Stock, authorized 15,000,000 shares, $.01 par value; issued and
outstanding 6,798,637 and 6,765,758 shares, respectively 67,986 67,657
Additional paid-in capital 4,963,191 4,950,507
Accumulated deficit (1,541,916) (1,532,096)
--------------------------------------------------------------------------------- ------------------ -------------------
3,489,261 3,486,068
================================================================================= ================== ===================
$ 10,862,223 $ 10,897,345
================================================================================= ================== ===================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
SPARTA FOODS, INC.
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
For the three
months ended
December 31
-----------------
1997 1996
---- ----
<S> <C> <C>
Net sales $ 3,812,157 $ 3,111,222
Cost of sales 2,763,502 2,191,121
- ------------------------------------------------------------------------------------------------
Gross profit 1,048,655 920,101
Selling, general, and administrative expenses 1,004,075 757,285
- ------------------------------------------------------------------------------------------------
Operating income 44,580 162,816
Other income net 38,232 32,037
Interest expense (91,682) (82,467)
- ------------------------------------------------------------------------------------------------
Income (loss) before income tax (8,870) 112,386
Provision for income tax 950 1,250
- ------------------------------------------------------------------------------------------------
Net income (loss) $ (9,820) $ 111,136
================================================================================================
Net Income per common share
Basic earnings per share $ --- $ .02
================================================================================================
Weighted average number of common shares
outstanding 6,784,390 6,679,766
================================================================================================
Diluted earnings per share $ --- $ .01
================================================================================================
Weighted average number of common
and common equivalent shares --- 8,415,250
================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
SPARTA FOODS, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
For the three months
ended December 31
--------------------------
1997 1996
---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss) $ (9,820) $ 111,136
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation 145,083 120,147
Amortization 15,190 25,511
Changes in assets and liabilities:
Accounts receivable (67,700) (78,524)
Inventories 133,263 (137,464)
Prepaid expenses 3,471 (26,739)
Accounts payable and accrued expenses (341,294) (355,742)
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (121,807) (341,675)
- -----------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Decrease in restricted cash 1,456,755 ---
Purchases of equipment (1,660,560) (167,811)
Increase in deposits and other assets (10,484) 63,755
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (214,289) (104,056)
- -----------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Net borrowings on line of credit 379,187 611,105
Long-term borrowings, net (51,292) (159,201)
Issuance of Common Stock, net of costs 13,013 2,450
Deferred financing costs (4,812) ---
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 336,096 454,354
- -----------------------------------------------------------------------------------------------------------------------
Net increase in cash --- 8,623
Cash Balance
Beginning of period 600 600
=======================================================================================================================
End of period $ 600 $ 9,223
=======================================================================================================================
Supplemental Disclosures of Cash Flow Information
Cash payments for:
Interest $ 87,519 $ 81,992
Income taxes 2,000 1,250
=======================================================================================================================
Supplemental Schedule of Noncash Investing Activities
Facility improvements financed with accounts payable $ 403,399 $ ---
=======================================================================================================================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
Sparta Foods, Inc.
Notes to Condensed Consolidated Financial Statements
December 31, 1997
(unaudited)
NOTE 1. GENERAL
The unaudited condensed consolidated balance sheet at December 31, 1997,
the condensed consolidated statements of operations for the three-month
periods ended December 31, 1997 and 1996, and the condensed consolidated
statements of cash flows for the three-month periods ended December 31,
1997 and 1996, include all adjustments which in the opinion of management
are necessary in order to make the financial statements not misleading, and
are not necessarily indicative of results of operations to be expected for
the entire fiscal year ending September 30, 1998.
The unaudited financial statements should be read in conjunction with the
audited financial statements for the years ended September 30, 1997 and
1996, contained in Form 10-KSB and Management's Discussion and Analysis of
Financial Condition and Results of Operations contained herein.
NOTE 2. FINANCING AGREEMENTS
The Company has a line of credit with a bank, secured by all assets.
Maximum borrowings under the credit agreement are determined by a borrowing
base calculation or $1,200,000, whichever is less. Borrowings bear interest
at prime plus 0.25 percent (8.75 percent at December 31, 1997). At December
31, 1997, the Line of Credit and additional revolving credit borrowings of
$800,000 were fully utilized, and the Bank has extended temporary
overadvances. The additional bank revolving credit borrowings of $800,000
were made available through January 1, 1998 to provide the Company with
cash to install its new equipment in connection with its recent move to its
new manufacturing facility. The term of the additional revolving credit
borrowings was extended through March 1, 1998. The Company is to maintain
certain minimum net worth and debt service coverage levels. In addition, a
maximum debt to net worth ratio is specified, dividends and capital
expenses are restricted, and compensation and new options and warrants are
also limited.
On July 1, 1997, the Minnesota Agricultural and Economic Development Board
issued $1,950,000 in Series 1997D tax-exempt Bonds, the proceeds of which
issue were loaned to the Company to finance new equipment. The underlying
loan from the state is due in monthly installments which vary in accordance
with the maturity dates of the related revenue bonds, plus interest at
rates varying from 4.5 to 6.0 percent. The effective rate of interest to
the Company is 5.79 percent per annum. At December 31, 1997, $1,893,750 is
outstanding. The Company is to maintain net worth and debt service coverage
levels, and a debt service reserve fund and a construction fund. The debt
service reserve fund will remain until all loan obligations have been
satisfied. The construction fund represents undisbursed loan proceeds that
are available for approved improvement and equipment expenditures. These
amounts have been reflected on the consolidated balance sheet as restricted
cash as follows:
<PAGE>
Debt service reserve fund, U.S. government
securities due within one year $ 195,000
Construction fund, money market funds 242,211
-------
$ 437,211
NOTE 3. INCOME TAX
The provisions for income tax are based upon a minimum state tax. The
availability of tax benefits from prior years offsets any regular taxes.
NOTE 4. NET INCOME (LOSS) PER COMMON SHARE
The Company has adopted "Statement of Financial Accounting Standards No.
128, Earnings per Share" (FAS 128) which became effective for this
quarter's financial statements. FAS 128 requires the presentation of basic
earnings per share (EPS) and diluted per share amounts. Basic EPS is the
net income related to the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects potential dilution
assuming the issuance of Common Stock for stock options and warrants
exercisable under the treasury stock method. Presentation of EPS of the
prior period accordingly has been restated for comparative purposes.
Basic EPS for the current three-month period is zero, and a computation of
diluted EPS would be antidilutive. Diluted EPS of the prior period includes
1,735,484 weighted-average shares assumed issued for options and warrants.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
La Canasta of Minnesota, Inc. ("La Canasta"), the predecessor of Sparta
Foods, Inc. (the "Company"), and now a wholly-owned subsidiary of the
Company, began producing limited volumes of hand stretched tortillas, corn
tortillas and corn tortilla chips shortly following its organization in
1981, primarily for sale to restaurants. The Company was organized under
the laws of the State of Minnesota in 1988, originally under the name of
"Sparta Corp." for the purposes of raising capital for the acquisition of,
or investment in, a business. In January 1991, the Company acquired all of
the outstanding capital stock of La Canasta. During the period 1991 through
1993 the Company completed acquisitions which expanded its trademark retail
brands to include Cruz, Chapala, Mexitos and La Campana Paradiso, its food
service customers to include McDonald's restaurants and its retail
distribution network to include Bradley Distributing, Inc. In 1995 the
Company relocated its Lakeville, Minnesota production operations to its St.
Paul manufacturing facility. The Company leased the Lakeville facility in
1996 for a period of 10 years. Effective September 1, 1997 the Company
signed a 15-year lease to relocate all operations to an office and
manufacturing facility in New Brighton, Minnesota. The current facility in
St. Paul has been sublet for the remainder of its lease term.
Results of Operations
The Company's net sales of $3,812,157 increased $700,935 (22.5%) for the
three months ended December 31, 1997, as compared to the three months ended
December 31, 1996. This increase resulted primarily from sales to new
customers in the food service industry and sales to the Company's primary
retail distributors, Crystal Farms Refrigerated Distribution Company and
Marigold Foods, Inc.
Gross profit, as a percentage of net sales, for the three months ended
December 31, 1997, was 27.5% compared to 29.6% for the three months ended
December 31, 1996. The lower percentage for the most recent period reflects
additional manufacturing costs associated with maintaining two operating
locations during the quarter. The relocation of all operations and
installation of new equipment was substantially completed by the end of the
quarter.
Selling, general and administrative expenses increased $246,790 or 33% in
the three months ended December 31, 1997, as compared to the same period in
1996. This increase is the result of the net sales increase for the period
and reflects some additional expense incurred in advertising and promoting
the Company's new line of Cruz flavored tortillas in the retail market.
Interest expense increased $9,215 for the three-month period ended December
31, 1997 compared to the three months ended December 31, 1996 due primarily
to higher levels of bank borrowings. The Company was required to draw on
its lines of credit in order to finance the costs of installing new
manufacturing equipment in its new manufacturing facility in New Brighton,
Minnesota.
Net loss for the three months ended December 31, 1997 was $9,820, compared
to net income of $111,136 for the same period in 1996.
<PAGE>
Liquidity and Capital Resources
The Company financed its current activities primarily through short-term
borrowings and cash generated from its operations.
Cash used in operating activities during the three months ended December
31, 1997 was $121,807 consisting principally of the net loss of $9,820, an
increase in accounts receivable of $67,700 and a decrease in accounts
payable and accrued expenses of $341,294. This was offset by a decrease in
inventories of $133,263 and depreciation and amortization of $160,273. Cash
used in investing activities was $214,289, primarily the result of the
purchase and installation of new equipment in the Company's new
manufacturing facility. Cash provided by financing activities was $336,096
due mainly to a net increase in short-term borrowings under the Company's
Line of Credit.
At December 31, 1997, the Company's bank Line of Credit and additional
revolving credit borrowings of $800,000 were fully utilized, and the Bank
has extended temporary overadvances. The additional bank revolving credit
borrowings of $800,000 were made available through January 1, 1998 to
provide the Company with cash to install its new equipment in connection
with its recent move to its new manufacturing facility. The term of the
additional revolving credit borrowings was extended through March 1, 1998.
The Company and the Bank are in negotiations to increase the $800,000
borrowings and convert these borrowings into a five-year term loan. The
amount available under this Line of Credit fluctuates daily based upon the
Company's eligible accounts receivable and inventory. All borrowings under
the Bank's Credit Agreement are subject to various financial covenants, the
violation of which could result in termination of the loan agreements which
would require the Company to repay the loans in full. It is management's
opinion that the Company will be able to meet the requirements of these
covenants in the future; however, there is no assurance that the Company
will not violate the financial covenants in the future or that the bank
would waive any such violations.
At December 31, 1997, the Company had cash of $600 and negative working
capital of $1,357,370. The Company is currently seeking additional debt or
equity financing to increase working capital and eliminate some of its high
yield debt. There is no assurance that the Company will be able to obtain
financing of any kind on acceptable terms. Without additional financing,
the Company's ability to fund its working capital requirements in fiscal
1998 will depend primarily on its success in meeting its projected
financial goals in fiscal 1998.
The Company believes that its bank credit facilities and cash flow from
operations will be sufficient to meet its operating requirements through
fiscal 1998, assuming the following: (i) the Company's fiscal 1998 sales
exceed fiscal 1997 sales; (ii) there are no significant unplanned increases
in expenses in fiscal 1998; and (iii) the Company is able to keep its bank
credit facilities operative.
Seasonality
The Company has historically had higher sales in its third and fourth
fiscal quarters which end June 30, and September 30, respectively, than in
its first and second quarters. Management believes that this is a result of
seasonal consumption patterns with respect to the Company's food products,
such as consumption of higher volumes of tortilla chips, salsa and barbecue
sauces, during the summer months. This seasonality may cause quarterly
results of operations to fluctuate.
<PAGE>
Raw Material Cost Fluctuations
The Company does not enter into futures contracts as defined by Statements
of the Financial Accounting Standards Board. It does, however, enter into
purchase orders for delayed delivery of raw materials, generally 30 days
for raw materials other than flour and corn. The Company enters into
purchase orders for delayed delivery of flour and corn for a period of 4-12
months, depending on current pricing, to ensure the availability of the
type of flour and corn best suited for the Company's products. These
purchase orders are placed directly with the suppliers.
Outlook
The Company's plan in fiscal 1998 is to continue to take advantage of
strong industry growth patterns. The Company plans to utilize its new
equipment, with improved production capacity, to increase sales and improve
profitability by focusing on new markets and product brand positioning of
tortillas and tortilla chips in the retail and food service markets.
Management believes that its major computer applications which are critical
to the Company's operations are either Year 2000 compliant or require
nonmaterial resources to make them Year 2000 compliant.
In December, 1997, the Company received notice from one of its sauce
customers that the customer will discontinue using the Company as the
customer's manufacturer of barbecue sauce effective July 1, 1998. Sales of
the customer's barbecue sauce represented approximately 9%, 8% and 7% of
the Company's net sales for fiscal years ended September 30, 1995, 1996,
and 1997 respectively and 6% of net sales for the three-month period ended
December 31, 1997. The Company anticipated that sales of the customer's
barbecue sauce would have represented less that 5% of the Company's net
sales for the fiscal year ending September 30, 1998. The Company believes
that the loss of this customer will not have a material adverse effect on
the Company's net sales for the fiscal year ending September 30, 1998, but
net sales from the production of barbecue sauces, salsas and other products
are expected to decrease substantially unless the Company replaces the
customer's production capacity with one or more new customers. There is no
assurance that the Company will be successful in entering into new sauce
manufacturing agreements with any new customers.
The foregoing statements contained in this Outlook section of Management's
Discussion and Analysis of Financial Condition and Results of Operations,
including those relating to the Company's (i) ability to meet its covenant
requirements under its Credit Agreement and (ii) operating requirements
through fiscal 1998 contained in Management's Discussion and Analysis of
Financial Condition and Results of Operations are forward looking
statements that involve a number of risks and uncertainties. Some
additional factors that could cause actual results to differ materially
include but are not limited to seasonality of its sales and raw materials
cost fluctuations, which are discussed above, and the following:
Reliance on Principal Customers. During 1997, sales to Crystal Farms
Refrigerated Distribution Company ("Crystal Farms") and Catalina Specialty
Foods, Inc. accounted for approximately 23% and 12% respectively of the
Company's sales and management expects Crystal Farms to account for a
greater percentage of the Company's sales in the future. Crystal Farms is
the Company's largest single distributor of its retail products and has a
significant impact on the Company's growth in the retail market. Although
the Company and Crystal Farms operate under a distribution agreement, the
loss of Crystal Farms as a customer would have a material and adverse
effect on the Company's sales and profitability and future growth.
<PAGE>
Competition. The Mexican-style food manufacturing and distribution industry
is highly competitive. The Company is in competition with a number of
manufacturers and distributors of Mexican-style food products and, to a
limited extent, manufacturers of "snack foods," many of which are better
capitalized than the Company. The Company will also be subject to future
competition from other manufacturers, distributors and retailers who enter
into the Mexican-style food and distribution industry. In the retail
market, many of these competitors engage in extensive local and national
advertising and marketing, and the brand names for products distributed by
those competitors are significantly more recognizable to the consumer than
the Company's brand names. In addition, competition for shelf space in
retail grocery stores is intense. In the food service market, the Company
is competing with a number of regional and national producers of
Mexican-style food products. Many of these competitors are better
capitalized than the Company and have established sales organizations. No
assurance can be given that the Company will be able to compete as it
expands its markets.
Sufficiency of Working Capital. At December 31, 1997, the Company had
negative working capital of $1,357,370. At December 31, 1997, the full
amount had been drawn under the Company's Line of Credit, and the Bank had
extended temporary overadvances. The amount available fluctuates daily
based upon the Company's eligible accounts receivable and inventory.
Without additional debt or equity capital, the Company's ability to fund
its working capital requirements in fiscal 1998 will be almost entirely
dependent on generating sales which exceed the Company's fiscal 1997 sales
and keeping its bank credit facilities operative. In addition, any
unforeseen expense of a material nature would materially and adversely
affect the Company's ability to fund ongoing operations.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.41 Amendment to Consultant Agreement dated December 30, 1997
between the Registrant and Catalina Specialty Foods, Inc.
11 Computation of Earnings Per Common Share.
27 Financial Data Schedule (filed only in electronic format).
(b) Reports on Form 8-K
A report on Form 8-K was not filed during the quarter ended December 31,
1997.
<PAGE>
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.
SPARTA FOODS, INC.
(Registrant)
Dated: February 10, 1998 By:/s/ Joel P. Bachul
Joel P. Bachul,
President and Chief Executive Officer
Dated: February 10, 1998 By:/s/ A. Merrill Ayers
A. Merrill Ayers
Treasurer, Secretary and
Chief Financial Officer
Exhibit 10.41
AMENDMENT TO CONSULTANT AGREEMENT
EFFECTIVE DATE: December 30, 1997
PARTIES:
Sparta Foods, Inc.
1565 First Avenue NW
New Brighton, MN 55112
Fax Number: (612) 697-0600 ("Sparta")
Catalina Specialty Foods, Inc.
2550 Kasota Avenue
St. Paul, MN 55108
Fax Number: (612) 647-6855 ("Consultant")
RECITALS:
A. Sparta and Consultant are parties to that certain Consultant Agreement
dated January 1, 1996 (the "Agreement") as previously amended.
B. The parties desire to extend the term of the Agreement pursuant to the
terms and provisions contained herein.
AGREEMENT:
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Extension of term. The parties hereby agree that the Agreement shall be
renewed for an additional one (1) year term to expire at the end of business on
December 31, 1998, unless terminated earlier pursuant to the terms of Section 10
of the Agreement.
2. Compensation. Section 4 of the Agreement is hereby amended in its
entirety to read as follows:
Sparta shall pay Consultant a base consulting fee of Eighty Thousand
Dollars ($80,000) for the calendar year January 1, through December 31,
1998. Such amount shall be paid every two weeks during calendar year 1998
(in the amount of $3,076.92), payable in arrears on the same date as Sparta
pays its employee payroll obligations. Any amount not paid when due shall
be subject to a late payment fee computed daily at a rate equal to eighteen
percent (18%) per annum or the highest rate permitted under applicable
usury law.
<PAGE>
Consultant shall be eligible for a bonus if the bonus criteria set forth on
Exhibit B attached hereto is met (the "Bonus").
3. Exhibit B. Exhibit B is hereby revised in its entirety and revised
Exhibit B attached hereto shall supersede and take the place of Exhibit B to the
Agreement.
4. Continuing Effect of Agreement. The Agreement shall continue in full
force and effect, without amendment, through December 31, 1997. For calendar
year 1998, the Agreement shall continue in full force and effect except as
expressly amended in this Amendment. All provisions contained in Section 12 and
Section 13 of the Agreement shall apply to this Amendment.
The parties hereto have caused this Amendment to be executed by their duly
authorized representative to be effective as of the day and year first above
written.
CATALINA SPECIALTY FOODS, INC.
("Consultant")
By /s/ Mary Catherine Gooch
Mary Catherine Gooch, President
SPARTA FOODS, INC.
("Sparta")
By /s/ Joel P. Bachul
Joel P. Bachul, President and CEO
The undersigned does hereby agree to continue to be bound by the provisions
of Section 2(j), Section 6 and Section 11(c) as it applies to Section 6 of the
Agreement as amended herein.
/s/ Mary Catherine Gooch
MARY CATHERINE GOOCH
Exhibit 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(unaudited)
<TABLE>
<CAPTION>
For the three months For the three months
ended ended
December 31 December 31
1997 1996
---- ----
<S> <C> <C>
Net income (loss) $ (9,820) $ 111,136
- ----------------- ========= =========
Basic earnings per share
Weighted-average number of
common shares outstanding 6,784,390 6,679,766
========= =========
Basic earnings (loss) per share $ -0- $ .02
- ------------------------------- ========= =========
Diluted earnings per share Note
- -------------------------- ----
Shares:
Weighted-average number of common
shares outstanding 6,679,766
Excess of shares issuable for the
assumed exercise of options and
warrants over the number of shares possible
of repurchase using the proceeds from the
exercise of such options and warrants, at the
average market price (treasury stock method) 1,735,484
---------
Weighted-average number of common
and common equivalent shares
outstanding 8,414,250
---------
Diluted earnings per share $ .01
- -------------------------- ---------
</TABLE>
Note
- ----
A computation would be antidilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S FORM 10-QSB FOR THE PERIOD
ENDED 12/31/97 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 600
<SECURITIES> 0
<RECEIVABLES> 950,667
<ALLOWANCES> 49,500
<INVENTORY> 964,307
<CURRENT-ASSETS> 2,019,069
<PP&E> 9,039,523
<DEPRECIATION> 2,474,659
<TOTAL-ASSETS> 10,862,223
<CURRENT-LIABILITIES> 3,376,439
<BONDS> 3,996,523
0
0
<COMMON> 67,986
<OTHER-SE> 3,421,275
<TOTAL-LIABILITY-AND-EQUITY> 10,862,223
<SALES> 3,812,157
<TOTAL-REVENUES> 38,232
<CGS> 2,763,502
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,004,075
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 91,682
<INCOME-PRETAX> (8,870)
<INCOME-TAX> 950
<INCOME-CONTINUING> (9,820)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,820)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
