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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND 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, 1997 (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 number of shares of the Registrant's Common Stock, par value $.0001 per
share outstanding on May 15, 2000 is 22,692,215.
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VITAFORT INTERNATIONAL CORPORATION
CONTENTS
PART 1 - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements:
Balance Sheets - March 31, 2000 (unaudited)
and December 31, 1999 3-4
Statements of Operations (unaudited) -
Three Month Periods Ended March 31, 2000 and 1999 5
Statement of Stockholders' Equity (unaudited) -
Three Month Period Ended March 31, 2000 6
Statements of Cash Flows - (unaudited)
Three Month Periods Ended March 31, 2000
and 1999 7
Notes to the Financial Statements (unaudited) 8-9
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10-13
PART II - OTHER INFORMATION
Signature................ 14
2
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VITAFORT INTERNATIONAL CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of March 31, 2000 and December 31, 1999
ASSETS
March 31,
2000 December 31,
(Unaudited) 1999
Current assets
Cash and cash equivalents $946,462 $1,119,153
Marketable securities - 536,667
Accounts receivable, less allowance
for doubtful accounts of $84,284
and $63,782 125,366 139,137
Inventories 505,459 585,407
Other receivables 216,828 47,383
Prepaid expenses and
other current assets 815,161 676,753
Total Current Assets 2,609,276 3,104,500
Equipment
Manufacturing equipment 138,114 106,019
Furniture and office equipment 109,654 109,654
Computer equipment 272,559 270,588
520,327 486,261
Less accumulated depreciation 319,625 305,434
Total Equipment 200,702 180,827
Other Assets
Intangible assets, net of
accumulated amortization
of $107,706 and $96,297 515,447 526,856
Other assets 875 138,006
Total Other Assets 516,322 664,862
Total Assets $3,326,300 $3,950,189
See accompanying notes to consolidated financial statements.
3
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VITAFORT INTERNATIONAL CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of March 31, 2000 and December 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
March 31,
2000 December 31,
(Unaudited) 1999
Current liabilities
Notes payable - other $375,528 $392,209
Accounts payable 731,859 836,500
Accrued expenses 482,130 469,533
Total Current Liabilities 1,589,517 1,698,242
Long-term debt, less current portion 7,793 26,331
Total long-term liabilities 7,793 26,331
Minority Interest 490,474 654,151
Stockholders' equity
Series B, 10% cumulative convertible
preferred stock, $.01 par value;
authorized 110,000 shares; issued and
outstanding 1,000 shares, aggregate
liquidation preference of $50,000 10 10
Series C, convertible preferred stock,
$.01 par value; authorized 450 shares;
issued and outstanding 50 shares,
aggregate liquidation preference of
$50,000 1 1
Common stock, $.0001 par value; authorized
30,000,000 shares; issued and
outstanding 19,686,788 and
17,487,288 shares 1,969 1,749
Additional paid-in capital 29,133,847 28,398,646
Accumulated deficit (27,897,311) (26,828,941)
Total Stockholders' Equity 1,238,516 1,571,465
Total Liabilities
& Stockholders' Equity $3,326,300 $3,950,189
See accompanying notes to consolidated financial statements.
4
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VITAFORT INTERNATIONAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
2000 1999
Net revenues $435,883 $839,698
Cost of sales 386,946 410,510
Gross profit 48,937 429,188
Operating expenses
Research and development 33,921 10,428
Sales and marketing 540,814 430,068
General and administrative 850,410 392,403
Total operating expenses 1,425,145 832,899
Loss from operations (1,376,208) (403,711)
Other income (expense)
Other income - 270,280
Interest income 9,795 22
Interest expense (11,250) (113,909)
Minority interest in net loss of
consolidated subsidiary 273,173 -
Total other income (expense) 271,718 156,393
Loss before income tax expense (1,104,490) (247,318)
State income tax expense 6,400 -
Net loss after tax, before
extraordinary item (1,110,890) (247,318)
Extraordinary gain on
forgiveness of debt 42,520 -
Net loss $(1,068,370) $(247,318)
Basic and diluted net
loss per common share $ (0.06) $ (0.02)
Basic and diluted
weighted average
shares of common stock 18,020,505 12,187,511
See accompanying notes to consolidated financial statements.
5
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VITAFORT INTERNATIONAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(Unaudited)
Series B Series C
Convertible Convertible
Preferred Preferred Additional
Stock Stock Common Stock Paid-In Accumulated
Shares Amount Shares Amount Shares Amount Capital Deficit
Balance,
Jan 1,
2000 1,000 $ 10 50 $ 1 17,487,288 $1,749 $28,398,646 $26,828,941)
Exercise
of stock
options 2,199,500 220 666,348
Stock, options,
and warrants
issued for
services 68,852
Net Loss (1,068,370)
Balance,
Mar 31,
2000 1,000 $ 10 50 $ 1 19,686,788 $1,969 $29,133,846 $(27,897,311)
Total
Balance, Jan 1,2000 $1,571,465
Exercise of stock options 666,568
Stock, options and warrants
issued for services 68,852
Balance, Mar 31, 2000 $1,238,515
See accompanying notes to consolidated financial statements.
6
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VITAFORT INTERNATIONAL CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
2000 1999
Increase (Decrease) in Cash
and Cash Equivalents
Cash flows from operating activities:
Net loss $(1,068,370) $(247,318)
Adjustments to reconcile net loss to cash
and cash equivalents used in operating
activities
Extraordinary gain (42,520) -
Stock and options issued for services 413,768 -
Depreciation and amortization 25,600 61,653
Provision for doubtful accounts 20,502 -
Minority interest in net loss
of consolidated Subsidiary (273,173) -
Stock options exercised for services - 38,455
Changes in operating assets
and liabilities:
Accounts receivable (168,877) 255,522
Inventories 79,949 (147,101)
Prepaid expenses
and other current assets (27,072) 37,393
Other assets 18,495 -
Accounts payable (62,121) (361,168)
Income taxes payable (23,838) -
Accrued expenses 30,591 120,025
Cash and cash equivalents
used in operating activities (1,145,918) (242,539)
Cash flows from investing activities:
Purchase of computer equipment (34,066) -
Proceeds from sale of marketable securities 536,667 -
Cash and cash equivalents provided by
investing activities 502,601 -
Cash flows from financing activities:
Proceeds from issuance of stock 500,000 -
Proceeds from notes payable 11,568 31,000
Repayment of notes payable (40,942) (118,635)
Cash and cash equivalents provided
by (used in) financing activities 470,626 (87,635)
Decrease in cash and cash equivalents (172,691) (330,174)
Cash and cash equivalents, beginning of period 1,119,153 872,649
Cash and cash equivalents, end of period $946,462 $542,475
See accompanying notes to consolidated financial statements
7
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VITAFORT INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - GENERAL
The unaudited consolidated financial statements have been prepared on the
same basis as the audited consolidated financial statements for the year ended
December 31, 1999 and, in the opinion of management, reflect all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation
for each of the periods presented. The results of operations for interim
periods are not necessarily indicative of results to be achieved for full
fiscal years.
As contemplated by the Securities and Exchange Commission (SEC) under item
310(b) of Regulation S-B, the accompanying consolidated financial statements
and related footnotes do not contain certain information that will be included
in the Company's annual consolidated financial statements and footnotes
thereto. For further information, refer to the consolidated financial
statements and related footnotes included in the Company's Annual Report filed
on Form 10-KSB for the year ended December 31, 1999.
Vitafort continues to develop, market and distribute snacks to the retail
grocery trade; however, the Company has created a wholly owned subsidiary,
Visionary Brands, Inc., to execute this strategy. Visionary Brands is in the
business of creating brands and products in the grocery industry, and
manufacturing and distributing the same. These products are marketed under
Company-developed brands such as "Peanut Squeeze," or licensed brands procured
by Hollywood Partners.com, Inc. such as "The Wizard of OZ" marshmallows.
The Company develops these products from the actual conception of the product
idea to the shipment of the product to the retailer.
Hollywood Partners.com, Inc. ("HP.com") is a marketing and promotions
company building a family of content, community and commerce opportunities
offered to Website visitors. Using entertainment-themed Websites, it presents
both proprietary and sourced content to build relationships with Website
visitors and to collect their demographic and lifestyle information. HP.com
expects to obtain revenues from many sources including sweepstakes
sponsorships, Website sponsorships and allowing access to its registered users
("Members") who have given permission for HP.com to send them offers from
marketing partners.
With the spin out of Hollywood Partners.com and the transition to
Visionary Brands as the grocery food and marketing company, Vitafort announced
its new strategic direction. Upon shareholder approval, Vitafort International
Corporation will change its name to Visionary Holdings, Inc. to reflect its
transformation into a holding company. This new entity currently owns 100% of
Visionary Brands and 57% of Hollywood Partners.com, or 4.619 million shares.
Management is also involved in discussions with additional entities that could
potentially fall under the umbrella of Visionary Holdings.
Management has also been in the development of its next business model
under the newly formed entity, Visionary Foods.com, Inc., incorporated in April
2000. This company is a wholly owned subsidiary of the Company and will be
the vehicle utilized to execute strategic acquisitions in the grocery home
delivery business. Management has identified several regional home grocery
delivery companies that specialize in high quality frozen meat, chicken and
seafood. The unaudited combined 12 month historical revenue of these potential
acquisitions is over $20 million. The Company has formulated a strategic plan
to combine these regional grocers into a national Web-enabled home grocery
delivery service specializing in high quality center of the plate entrees.
However, there are no guarantees that the Company will be able to acquire
these companies and execute this strategy.
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NOTE 2 -- LOSS PER SHARE
For the three months ended March 31, 2000, basic and diluted loss per
share had been computed using the weighted average number of common share
oustanding during the period. Dividens on cumulative preferred stock are not
material.
NOTE 3 - INVENTORIES
Inventory consists of the following:
March 31, 2000 December 31, 1999
Finished goods $312,540 $352,847
Packaging and raw material 192,919 232,560
$505,459 $585,407
NOTE 4 - STOCKHOLDERS' EQUITY
During the three month period ended March 31, 2000, the holders of stock
options to purchase 2,199,500 shares of stock exercised these options as
compensation for services rendered and to be rendered. Stocks, options, and
warrants issued for services by Hollywood Partners.com, a subsidiary of
the Company, in the amount of $68,852 reflects the Company's percentage
ownership of the transactions.
NOTE 5 - GOING CONCERN
The Company has prepared the financial statements included herewith
assuming that the Company will continue as a going concern. Although the
Company raised additional capital in 1999, it has not generated sufficient
revenue-producing activity to sustain its operations. Accordingly, the
Company must realize a satisfactory level of profitability from its current
and future operations in order to remain a viable entity. The Company's
auditors have included an explanatory paragraph in their report for the year
ended December 31, 1999 indicating there is substantial doubt regarding the
Company's ability to continue as a going concern. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of any uncertainty.
NOTE 6 - LITIGATION
The Company is a party to legal proceedings (which generally relate to
disputes between the Company and its suppliers or customers regarding payment
for products sold or supplied) that are typical for a company of its size and
scope and financial condition, and none of these proceedings are believed to be
material to its financial condition or results of operations.
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NOTE 7 - SUBSEQUENT EVENT
Lee M. Lambert, the President, CEO and Treasurer of Hollywood
Partners.com, Inc., has indicated to the Company that he does not intend to
continue as an officer or director of HP.com upon expiration of his contract
on June 30, 2000. On May 16, 2000, Mr. Lambert resigned his positions as
CEO and Treasurer, and Eugene Scher, a Director of HP.com, assumed these
positions.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AS RESULTS OF OPERATIONS
(Unaudited)
Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private
Securities Litigation Reform Act of 1995:
Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private
Securities Litigation Reform Act of 1995. Certain statements contained in this
Quarterly Report on Form 10-QSB ("Form 10-QSB") constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements involve known and unknown risks, uncertainties and
other factors that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different than any
expressed or implied by these forward-looking statements. These statements may
be contained in our filings with the Securities and Exchange Commission, press
releases, and written or oral presentations made by our representatives to
analysts, rating agencies, stockholders, news organizations and others. In some
cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "intend", "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," "continue," or the negative
of these terms or other comparable terminology. Although we believe that the
expectations in the forward-looking statements are reasonable, we cannot
guarantee future results, levels of activity, performance or achievements. See
also the information set forth in Exhibit 99.1 on our Form 8-K dated January
21, 2000 titled "RISK FACTORS," incorporated herein to this quarterly report
on Form 10-QSB.
Three Months Ended March 30, 2000 and 1999
Results of Operations:
During this past quarter, management continued the execution of its new
strategic direction. As a holding company, management believes that certain
resources and strategic partnerships can be shared among the unique entities.
Hollywood Partners.com, the Company's first spin out, continued to develop its
business model in the first quarter with the introduction of its new Website,
PlanetFree.com, a new sweepstakes Website that replaced the sweepstakes
functions of the prior Hollywood Partners.com Website and that initially can
host up to 20 sweepstakes at one time. This Website is designed to host
sweepstakes and promotions for retailers and manufacturers who we believe are
seeking a higher level of branding and capability to educate than generally
offered on other sweepstakes Websites.
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Management has also been in the development of its next business model
under the newly formed entity, Visionary Foods.com, Inc., incorporated in April
2000. This company is a wholly owned subsidiary of the Company and will be
the vehicle utilized to execute strategic acquisitions in the grocery home
delivery business. Management has identified several regional home grocery
delivery companies that specialize in high quality frozen meat, chicken and
seafood. The unaudited combined 12 month historical revenue of these potential
acquisitions is over $20 million. The Company has formulated a strategic plan
to combine these regional grocers into a national Web-enabled home grocery
delivery service specializing in high quality center of the plate entrees.
However, there are no guarantees that the Company will be able to acquire these
companies and execute this strategy.
In the first quarter of 2000, the Company continues to develop its new
food marketing entity, Visionary Brands, which focuses on the marketing and
distributing of new innovative foods to the grocery industry. Visionary Brands
introduced two new products in 1999. The initial product launched was "Peanut
Squeeze," the first product in the peanut butter category that can be dispensed
from a squeezable bottle. The product has been placed in over 5,000 stores
across the country. The market introduction of Peanut Squeeze has been
negatively impacted by defective product. The inability of the manufacturer
pf the peanut filling to meet product specifications has resulted in the
Company losing sales and shelf space and having to incur greater marketing
costs.
In conjunction with Hollywood Partners.com, Inc., Visionary Brands
introduced its latest product, "Gravity Games Energy Bar." This snack was
unveiled at the Gravity Winter Games held at Mammoth Mountain, California in
January 2000. The Gravity Games is a joint venture between NBC Sports
Ventures, the business unit of NBC Sports, and eMap Petersen, Inc., the largest
special interest publisher in the United States with more than 160
publications.
Visionary Brands began distribution of the Gravity Bar late in the first
quarter of 2000. This new entry into the Energy Bar nutritional category is
targeted to the younger consumer (12-24 years of age) and the license with the
Gravity Games that also targets similar demographics. Gravity Bars come in two
flavors, Chocolate Peanut and Chocolate Fudge, both with Ginseng, 12 grams of
protein and 35% R.D.A. of certain vitamins.
Net Revenues:
For the three months ended March 31, 2000, net sales were $435,883
compared to $839,698 for the same period in 1999, a decrease of $403,815 or
48%. The decrease in net revenues was due primarily to delay in the
repackaging of the product lines with the new Visionary Brand look and
reformulation of the "Peanut Squeeze" line to improve production efficiencies.
Gross Profit:
Gross profit decreased from $429,188 for the three months ended March 31,
1999 to $48,937 for the three months ended March 31, 2000, a decrease of
$380,251 or 89%. Gross profit was 11% of net revenues for the quarter ended
March 31, 2000, compared to 51% for the same period in 1999. The decrease in
gross profit is due to higher production costs created by production of
"Peanut Squeeze" discussed above.
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Research and Development:
Total research and development expenses for product development in the
quarter ended March 31, 2000 were $33,921 compared to $10,428 for the same
period in 1999, an increase of $23,493 or 225.3%. The increase in research and
development expenses is due primarily to development expenses for the Company
websites.
Sales and Marketing:
Total sales and marketing expenses for the quarter ended March 31, 2000
were $540,814 compared to $430,068 for the three months ended March 31, 1999,
an increase of $110,746 or 26%. Increased expenses were primarily related to
customer aquisition costs for "Peanut Squeeze" of $55,320, promotional expenses
for the launch of the Gravity Bars of $21,086 and the cost of Website design
and programming, of $76,041, offset by decreases in commissions expenses of
$17,400 and in freight-out costs of $27,600.
General and Administrative:
For the quarter ended March 31, 2000, total general and administrative
expenses were $850,410 compared to $392,403 for the same quarter ended March
31, 1999, an increase of $458,007. Significant cost increments was primarily
in the following areas: consulting expense of $109,000, and management and
staff salaries of $211,00, due to increase of staffing and office expenses to
accommodate the new employees.
Other Income (Expense):
Interest expenses decreased from $113,909 in the same quarter in 1999, to
$11,250 in the quarter ended March 31, 2000, a change of $132,659 or 90%, due
to the repayment of debt.
Liquidity and Capital Resources:
Three Months Ended
March 31,
1999 2000
Net Cash Used for
Operations $ (1,145,918) $ (242,539)
Net Cash Provided by
Investing Activities 502,601 -
Net Cash Provided by
(Used in) Financing Activities 470,626 (87,635)
Working Capital(Deficit) 1,019,759 (1,406,258)
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The Company continues to expend resources in the product development area
for the scheduled introduction of new products. However, there is no guarantee
that these products, once introduced in the market, will achieve the
anticipated level of sales forecast by the Company nor reach the gross profit
margin targeted by the Company for each of the products. In addition, while
the Company's financial condition has improved over the past twelve months,
there is no guarantee that new co-packers will provide the Company with credit
terms. Nor is there any assurance that the Company will be able to meet its
future cash obligations without additional external funding and improved sales.
Neither additional financing nor improved sales can be guaranteed to occur in
the future. While the Company has made significant improvement in rebuilding
customer relationships, the process has been slow and costly, and there is no
guarantee that these customers will purchase products from the Company with the
same enthusiasm that they have in the past.
The Company continues to suffer recurring losses from operations as of
March 31, 2000 and has not generated sufficient revenue-producing activity to
sustain its operations. The Company's independent certified public accountants
have included a modification to their opinion on the Company's December 31,
1999 financial statements, which indicates there is substantial doubt about the
Company's ability to continue as a going concern. See "Note 5" to the
consolidated financial statements for additional information. The Company is
attempting to raise additional capital to meet future working capital
requirements and launch new products, but may not be able to do so. Should the
Company not be able to raise additional capital, it may have to curtail
operations.
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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
undersigned, thereunto duly authorized.
VITAFORT INTERNATIONAL CORPORATION
(Company)
/s/ John Coppolino
John Coppolino
President
/s/ Fred Rigaud
Fred Rigaud
Acting Chief Financial Officer
Date: May 22, 2000
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