<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
for the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from________to________
Commission File Number 0-18438
VITAFORT INTERNATIONAL CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 68-0110509
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1800 Avenue of the Stars, Suite 480, Los Angeles, CA 90067
(Address of principal executive offices)
(Zip Code)
(310) 552-6393
(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be
filed by section 13 or 15(d) of the Exchange Act of 1934 of during
the preceding twelve months ended December 31, 1994 (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
ninety days.
Yes: X No:
The aggregate market value of the shares of the Registrant's Common
Stock held as of September 30, 1995, based on the average bid and
asked prices as reported on OTC on such date was approximately
$5,069,232.
The number of shares of the Registrant's Common Stock, par value
$.0001 per shares outstanding on November 6, 1995 was 31,486,893.
Page 1
<PAGE>
VITAFORT INTERNATIONAL CORPORATION
CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
<S> <C>
ITEM 1. Financial Statements:
Balance Sheets - September 30, 1995 and December 31, 1994........... 3-4
Statements of Operations - Three Months Ended
September 30, 1995 and 1994, and Nine Months Ended
September 30, 1995 and 1994........................................... 5
Statements of Cash Flows - Nine Months Ended
September 30, 1995 and 1994........................................... 6
Notes to the Financial Statements..................................... 7-10
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................. 11-13
Signatures........................................................... 14
</TABLE>
Page 2
<PAGE>
VITAFORT INTERNATIONAL CORPORATION
BALANCE SHEET
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 317,551 $330,977
Accounts receivable - trade, net allowance
for doubtful accounts of $45,650 and
$35,456 in 1995 and 1994 respectively 160,509 150,937
Inventory 126,872 190,750
Prepaid expenses and other current assets 117,233 62,433
--------- -------
TOTAL CURRENT ASSETS 722,165 735,097
--------- -------
FIXED ASSETS:
Manufacturing equipment 94,216 94,216
Furniture and office equipment 80,795 77,888
Computer equipment 134,588 131,599
--------- -------
TOTAL FIXED ASSETS 309,600 303,703
Less Accumulated Depreciation and
Amortization (124,632) (78,551)
--------- -------
NET FIXED ASSETS 184,968 225,152
--------- -------
OTHER ASSETS:
Intangible and other assets 767,000 90,000
Less accumulated amortization (111,064) (53,758)
--------- -------
TOTAL OTHER ASSETS 655,936 36,242
--------- -------
TOTAL ASSETS $1,563,069 $996,491
--------- -------
--------- -------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
Page 3
<PAGE>
VITAFORT INTERNATIONAL CORPORATION
BALANCE SHEET
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
LIABILITIES & STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
(UNAUDITED)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts Payable - trade $ 107,563 $ 279,864
Accrued expenses 473,323 443,665
Notes payable 500,000 0
Notes payable - 5% convertible Note 500,000 500,000
Notes payable - other 435,000 0
Current maturities of long-term debt 59,750 163,357
------------ ------------
TOTAL CURRENT LIABILITIES 2,075,636 1,386,886
------------ ------------
STOCKHOLDERS' EQUITY:
Series B 10% Cumulative Convertible Preferred
Stock, $0.01 par value, cumulative, 110,000
shares authorized, 2,000 shares issued and
outstanding at September 30, 1995 and
December 31, 1994; aggregate liquidation
preference of $100,000 at
September 30, 1995 and December 31, 1994 20 20
Series C, Convertible Preferred Stock, $0.01
par value, 450 shares authorized, 50 shares
issued and outstanding as of September 30,
1995 and December 30, 1994 aggregate
liquidation preference of $1 at
September 30, 1995 and December 31, 1994 1 1
Series D 8% Convertible Preferred Stock,
$0.01 par value, 2,000 shares authorized,
673 shares outstanding at September 30, 1995
and December 31, 1994 aggregate liquidation
preference of $673,000 at September 30, 1995
and December 31, 1994 7 7
Subscribed Stock, 458.33 shares of 1995
Series A Preferred Stock, (NET OF COMMISSIONS) 495,060
Subscribed Stock, 2,533,200 shares of Common Stock 386,576 74,925
Notes receivable on subscribed common stock (86,578) (74,925)
Common stock, $0.0001 par value 40,000,000
shares authorized (SEE NOTE 7), 27,125,693
shares outstanding at September 30, 1995
and 24,026,107 shares issued and
outstanding at December 31, 1994 4,517 2,403
Additional paid-in capital 10,416,074 9,722,557
Accumulated deficit (11,728,244) (10,115,383)
------------ ------------
TOTAL STOCKHOLDERS' DEFICIT (512,567) (390,395)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,563,069 $ 996,491
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
Page 4
<PAGE>
VITAFORT INTERNATIONAL CORPORATION
STATEMENTS OF OPERATIONS
SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPT. 30 NINE MONTHS ENDED SEPT. 30
1995 1994 1995 1994
------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net Sales $ 460,152 $ 457,650 $ 2,056,867 $ 748,527
Cost of Sales 293,985 287,170 1,130,659 471,408
--------- --------- ----------- ----------
Gross profit 166,167 170,480 926,208 277,119
--------- --------- ----------- ---------
Operating expenses:
Product development 122,729 55,166 213,530 220,449
Marketing 296,829 174,751 1,083,136 469,956
General and
administrative 654,033 374,051 1,156,813 1,028,084
Provision for
discontinued operations 0 0 0 150,000
--------- --------- ----------- ----------
Total operating
expenses 846,671 603,968 2,453,479 1,868,489
--------- --------- ----------- ----------
Operating loss (681,501) (433,488) (1,527,268) (1,591,370)
Interest income 16,149 2,919 19,007 2,919
Interest expense (46,532) (4,519) (104,039) (11,103)
Loss before provision
for income taxes (712,940) (435,088) (1,612,303) (1,599,554)
Income taxes 0 0 558 0
--------- --------- ----------- ----------
Net loss $(712,940) $(435,088) $(1,612,861) $(1,599,554)
--------- --------- ----------- ----------
--------- --------- ----------- ----------
Net loss per share $ (.03) $ (.02) $ (.06) $ (.07)
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
Page 5
<PAGE>
VITAFORT INTERNATIONAL CORPORATION
STATEMENTS OF CASH FLOWS
SEPTEMBER 30, 1995 AND DECEMBER31,1994
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net loss $(1,612,861) $(1,599,554)
Adjustments to reconcile net income to
net cash used in operating activities:
Provision for discontinued operations 0 150,000
Depreciation and amortization 265,227 93,747
(Increase) decrease in:
Inventory 63,878 (92,460)
Accounts receivable (9,572) (331,367)
Prepaids and other assets (57,530) 112,375
Increase (decrease) in:
Accounts payable (172,301) 7,694
Accrued expense 134,237 (58,895)
----------- -----------
NET CASH USED BY OPERATING ACTIVITIES (1,388,992) (1,718,460)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment $ (5,897) $(162,330)
Proceeds from sale of Crystal Clear Farms 0 (24,250)
----------- -----------
NET CASH FROM INVESTING ACTIVITIES (5,897) (186,580)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred and
common stock $550,000 $1,596,545
Proceeds from (repayment of) notes
payable, short term 935,000 (5,000)
Repayment of Long Term Debt (103,637) 0
Proceed from Long Term Borrowings 0 360,496
----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 1,381,393 1,952,041
NET INCREASE/(DECREASE) IN CASH (13,426) 47,001
CASH AT BEGINNING OF PERIOD 330,977 504,481
----------- -----------
CASH AT END OF PERIOD $ 317,551 $ 551,482
----------- -----------
----------- -----------
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
------------------ ------------------
(UNAUDITED) (UNAUDITED)
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for interest $ 61,937 $ 9,658
-------- --------
-------- --------
SUPPLEMENTAL DISCLOSURES OF NON-CASH
FINANCING ACTIVITIES:
Conversion of equity Series C Convertible
preferred stock to debt payable to Gefi
Holdings $ 0 $150,000
-------- --------
-------- --------
Accrued dividends on convertible preferred
stock $ 0 $ 5,173
-------- --------
-------- --------
Conversion of vendor and accrued operating
debt to equity $976,590 $ 0
-------- --------
-------- --------
Offset of notes receivable against accrued
expenses $ 74,295 $ 0
-------- --------
-------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
Page 6
<PAGE>
VITAFORT INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
(1) NATURE OF BUSINESS AND BUSINESS HISTORY:
Vitafort International Corporation (the Company) was
incorporated on September 28, 1990 in the state of Delaware to
succeed to the business of a California corporation of the same
name that was organized on February 7, 1986.
Until May 1, 1993, the Company was engaged in the design,
formulation and development of value-added food and beverages for
third parties. The Company also engaged in marketing wholesale
value-added seafood, primarily salmon.
The Company disposed of these operations in 1993, while still
maintaining a royalty interest therein.
The Company is presently engaged in formulating and marketing
fat-free foods.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) The accompanying financial statements include the accounts
of the Company and its subsidiaries. All material intercompany
accounts and transactions have been eliminated. The subsidiaries
have had no operations since 1994 and will remain inactive in the
near future.
(b) Inventories are stated at the lower cost (first-in, first-out
basis) or market.
(c) Fixed assets are composed of manufacturing equipment,
furniture, office equipment and computer equipment and are
recorded at cost. Depreciation is computed on a straight-line
basis over the estimated useful life of five years.
(d) Intangible assets are composed of debt issuance costs,
customer lists, and prepaid professional service contracts and are
recorded at cost. The intangible assets are being amortized on a
straight-line basis over periods not exceeding five years. All
intangible assets associated with Future Foods (a subsidiary) were
written-off during 1994.
(e) In the opinion of Company's management, the accompanying
unaudited financial statements contain all adjustments (consisting
of only normal recurring adjustments) necessary to present fairly
the financial position and results of operations for the periods
shown. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto
included in the Company's 1994 annual report on Form 10-KSB.
The results of operations for the nine month period ended
September 30, 1995 are not necessarily indicative of the results
to be expected for the full year.
Page 7
<PAGE>
VITAFORT INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
(f) For the purpose of cash flow, the Company considers all
highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
(g) Certain 1994 amounts have been reclassified to conform with the
1995 presentation.
(3) NET INCOME (LOSS) PER SHARE:
Net income (loss) per share of common stock is computed based
on the weighted average number of shares of common stock
outstanding of 24,299,044 and 21,520,919 for the nine month
periods ended September 30, 1995 and 1994 respectively and
24,585,133 and 22,035,468 for the three month period ended
September 30, 1995 and 1994, respectively.
(4) PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets as of September 30, 1995
and December 31, 1994 consist of the following:
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- -------------
Prepaid Product Development Expenses $ 25,208 $ 0
Prepaid Packaging Expenses 22,684 0
Prepaid Financing Fees-Debt Related 19,151 0
Prepaid Financing Fees-Equity Related 32,139 0
Other Current Assets 18,050 62,433
-------- -------
$117,233 $62,433
-------- -------
-------- -------
Most of the prepaid expenses at September 30, 1995 will be fully
amortized over the balance of 1995, except for equity related
financing fees. Equity related financing fees will be accounted
as a reduction of proceeds upon the completion of equity offering(s).
(5) ACCRUED EXPENSES:
Accrued expenses as of September 30, 1995 and December 31,
1994 consist of the following:
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- -------------
Accrued Compensation $101,442 $ 11,565
Accrued Settlements of Prior
Attorneys Fees* 0 181,270
Accrued Legal Fees 78,337 42,776
Accrued Public Relations Fees 25,743 32,381
Accrued Interest 52,444 32,381
Other Accrued Expenses 215,357 175,673
-------- --------
$473,323 $443,665
-------- --------
-------- --------
* SEE RELATED COMMENT UNDER (6D) NOTES PAYABLE-CURRENT MATURITIES.
Page 8
<PAGE>
VITAFORT INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
(6) NOTE PAYABLE:
(a) Note payable of $500,000 - 5% convertible bonds, in which
the note holder also has a three year option to purchase 100,000
shares of the Company's common stock at a price of $1.50 per
share. The note now bears interest at 12% per annum. In October
of 1995, the Company reached an agreement with the note holder to
convert the full principal and accrued interest directly into
equity as of November 3, 1995.
(b) The Company obtained short-term financing of 15% notes
payable totaling $550,000 secured by Company assets (trade
receivables, etc.) from several lenders providing approximately
$494,000 in net proceeds to the Company. The notes were issued
in February 1995 and mature in November 1995. Under the terms of
the original agreement, $50,000 of the original proceeds were held
in an escrow account, and these funds were used to retire an equal
principal amount of the notes payable in August of 1995. In June
1995, the holder of $50,000 of the original notes agreed to defer
interest payments in exchange for the right to convert to equity
before August 2, 1995 at (then) current market price of 40 per
share. The holder continued to defer interest on a month-to-month
basis until the note was converted into common stock at the Market
price on November 8, 1995, The remaining balance of $450,000 was
refinanced in early November by new creditors with a 15-month/ 8%
Convertible Debenture.
(c) The Company obtained short-term financing consisting of
unsecured 10% notes payable from several lenders totaling
$435,000. The funds were received in July, with retirement dates
beginning in December 1995. The majority of these amounts are
expected to convert into equity as part of a planned Private
Placement of equity before the end of 1995.
(d) Current Maturites: In the second quarter of 1995, the Company
reached an agreement with a prior attorney to exchange their
payable for a $55,000 note payable within one year and an option
to purchase common stock at $.50 per share (market price at time
$.66). The principal balance of remaining at September 30, 1995
of $37,000 is included in this item. The remaining balances
consist of several small notes. These notes are expected to be
retired over the next several months via regular scheduled
payments.
Page 9
<PAGE>
VITAFORT INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
(7) STOCKHOLDERS EQUITY:
During the nine months ended September 30, 1995, the following
common stock transactions occurred:
a) JANUARY TO JUNE 1995: The Company's co-packer received
194,000 shares for a consulting agreement related to product
development activities valued at $97,000. Three service providers
(vendors) received 71,306 shares in exchange for debt
approximating $45,000. A note holder received 107,486 shares in
exchange for approximately $43,000 of debt, and was given the
right to convert another $50,000 note payable at various rates
above market in exchange for deferred payment of accrued interest.
The issuance of options (see 6d) and 36,694 shares (warrant
exercises) brought in proceeds of $95,732.
b) JULY TO SEPTEMBER: The Company entered into a three year
public relations agreement, payable in stock at $.15 per share, and
issued 2,000,000 shares as payment of one half of the commitment.
Ten vendors and consultants were issued 562,600 shares of stock as
payment of against charges (past and future) in excess of $95,000.
The company sold subscriptions for $550,000 (of a total of
$625,000) in a bridge equity offering. Investors subscribed to
1995 Series A Preferred Shares, which automatically convert into
common shares when same are available (see "Subsequent Events"),
as well as callable warrants to purchase additional shares.
c) SUBSEQUENT EVENTS (THROUGH NOVEMBER 6, 1995): The Company
distributed an information statement documenting shareholder
approval for the increase in authorized shares from 40 million to
180 million shares, granting authority to the Board of Directors
to effect a reverse split of the stock at a future date, and
creating an option plan to incent the performance of Directors,
Officers, and Employees. The Company retired a note payable (see
Note 6a) in the amount of $500,000 and related accrued interest of
$40,000 in exchange common shares in a private transaction. The
Company also completed the bridge equity offering described in 7b
(above).
(8) GOING CONCERN:
The Company's financial statements have been prepared assuming
that the Company will continue as a going concern. At September
30, 1995, current liabilities exceed current assets by
$1,353,471 and the Company's accumulated deficit aggregates
$11,014,745. The Company's ability to continue operations is
dependent upon its ability to reach a satisfactory level of
rofitability. The accompanying financial statements do not
include any adjustments that might result from the outcome of
these uncertainties. As of August 11, 1995, the Company had
received short term financing coupled with a letter of intent for
a long-term funding commitment with a national investment banking
firm, but the actual mechanism for that funding continues as an
item of negotiation and the company continues to seek alternative
financing vehicles.
Page 10
<PAGE>
VITAFORT INTERNATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1995
(UNAUDITED)
NOTE 1 - Results of operations:
The Company's revenues in 1995 were from substantially different
product mix and organization than in 1994. A comparison of net
sales, gross profits, and operating expenses during the two
periods provides little meaningful information and is in no way
indicative of any trends or relevant in anticipating future
results. In the quarter ended September 30, 1995, the company
dealt with the ongoing operating stress of insufficient working
capital, the costs of maintaining existing distribution of its
primary product, "Fudgets", in the mass market (e.g.;
supermarkets), and the launch of new products ("Cakettes" and
confectionery items).
Net sales:
The net sales for the nine months ended September 30, 1995 were
$2,056,867 compared to the prior year to date net sale of
$748,527, an almost three-fold increase of $1,308,340. This
comparison is not meaningful as the Company was launching new
products in 1994 and has been substantially only in significant
operations since May of 1994 when it started shipping the
Fudget product line. Net sales for the three months ended
September 30, 1995 were $460,152 compared to a year ago for the
same period of $457,650. Net sales declined from $757,567 to
$460,152 or $300,028 from the three months ended June 30, 1995
due to working capital shortages (as the Company pursued
appropriate financing) which made it impossible to service or
support full sales potential, or to leverage earlier
distribution successes.
Gross profit:
The gross profit for the nine months ended September 30, 1995
was $926,208 or 45% of net sales as compared to $277,119 for the
prior year to date period, an increase of $649,089 (234%
increase) and 8 percentage points. The gross profit for the
three months ended September 30, 1995 was $166,167 or 36% of net
sales as compared to $170,480 or 37% of net sales for the same
period a year ago. In 1994 Fudgets were 71% of sales and
Crystal Geyser was 9% of sales. In the third quarter of 1995
the meatless cold cuts were less than 3% of net sales and the
Fudgets were over 95% of net sales. The comparison of gross
profit is not meaningful since the product mix is not
comparable. However the Fudget single serve product line as a
result of changing co-packers now costs 50% less than a year
ago.
Operating expenses:
Operating expenses for the nine month period ended September
30, 1995 were $2,453,479 compared to $1,868,489 for the same
period a year ago, an increase of $584,990 or 31% due
primarily to the fixed costs of expand distribution of the
Company's products in new retail markets in the early part of
the year. Specifically, the Fudget line was marketed to new
Page 11
<PAGE>
VITAFORT INTERNATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1995
(UNAUDITED)
NOTE 1 - Result of operations: (CONTINUED)
customers in 1995. As is customary in the wholesale food
industry, marketing and promotional expenses run high as a
percentage to sales in the first months of distribution.
Product development expenses are nominally comparable to last
year, but reflect improved efficiencies as the Company prepared
to produce and market several product lines in 1995, compared to
only one in 1994. 1995 operating expenses also reflect the
significant cost of securing short and long term financing,
measured primarily in brokerage, finder, and legal fees.
Operating expenses for the three months ended September 30,
1995 were $846,671 as compared to $603,968 or an increase of
$242,703 or 40% over the same period a year ago. The reasons
for the increase are comparable to those describing the year to
date changes: working capital shortfalls limited our ability to
leverage previous marketing/distribution successes, and the
significant cost of pursuing appropriate financing.
Interest expense:
Interest expenses were $104,039 for the nine months ended
September 30, 1995 as compared to $11,103 for the same period
last year, an increase of $92,936. Interest expenses were
$46,532 for the three months ended September 30, 1995 as
compared to $4,519 for the same period last year, an increase of
$42,013. The increase of interest expenses was due to higher
notes payable used to finance operations while the company
pursued equity financing.
NOTE 2 - Liquidity and capital resources:
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- -------------
Net cash used for operations $(1,388,992) $(1,718,460)
Net cash used for investing
activities (5,897) (186,580)
Net cash provided by financing
activities 1,381,393 (1,952,041)
Working capital deficit (1,350,741) (651,789)
Trends:
The Company net cash used from operations for the nine months
ended September 30, 1995 was $329,468 less than the same
period last year, an improvement of approximately 19%.
The Company continued to use strategic capital exchanges to
reduce its cash needs in the second half of 1995, although the
benefits of 3rd quarter efforts will not be recognized until the
Page 12
<PAGE>
VITAFORT INTERNATIONAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1995
(UNAUDITED)
4th quarter. This included exchanging debt for equity with
several service providers saving $178,000 in cash assets in the
second half of 1995. The Company also negotiated the
conversion of a $500,000 note payable, plus accrued interest,
directly into equity, effective in early November 1995. The
Company intends to enter into similar transactions in the future
where practicable.
The CEO has elected to defer his $12,500 monthly compensation
since May 1,1995, and two other key executives have taken
reductions in salary as well totaling $3,700 monthly, in the
interest of conserving current working capital.
The Company does not plan any significant capital expenditures
other than completing research and development projects
approximating $350,000 as the Company is positioning itself to
formulate, market and distribute products. The Company is
taking steps to sell off all equipment from a discontinued
product line.
The Company must become profitable and continue to access
outside capital resources in order to be a going concern. As
disclosed in the Notes to Consolidated Financial Statements
(Note 8), the Company received short term financing coupled
with a letter of intent for a long term funding commitment with
a national investment banking firm early in August 1995. This
will allow the company to expand distribution on existing
products, and complete the launch of several new products. A
portion of the financing proceeds will be used to retire any
convertible notes payable that decide to forego its opportunity
(or option) to convert to equity.
Page 13
<PAGE>
VITAFORT INTERNATIONAL CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf
by the under signed, thereunto duly authorized.
VITAFORT INTERNATIONAL CORPORATION
(Company)
-------------------
/s/ Mark Beychok
Chief Executive Officer
Date: November 8, 1995
Page 14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET, INCOME STATEMENT, AND STATEMENT OF CASH FLOWS, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 317,551
<SECURITIES> 0
<RECEIVABLES> 206,159
<ALLOWANCES> (45,650)
<INVENTORY> 126,872
<CURRENT-ASSETS> 722,165
<PP&E> 309,600
<DEPRECIATION> (124,632)
<TOTAL-ASSETS> 1,563,069
<CURRENT-LIABILITIES> 2,075,636
<BONDS> 0
<COMMON> 4,517
0
28
<OTHER-SE> (517,112)
<TOTAL-LIABILITY-AND-EQUITY> 1,563,069
<SALES> 2,056,867
<TOTAL-REVENUES> 2,075,879
<CGS> (1,130,659)
<TOTAL-COSTS> (2,453,479)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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