<PAGE>
FORM 10-Q. QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the period ended June 30, 1996
-------------
Commission File Number: 0-19409
KRANTOR CORPORATION
(Exact name of registrant as it appears in its charter)
Delaware 22-2993066
- ------------------------- -------------------
(State of incorporation) (I.R.S. Employer
identification no.)
120 East Industry Ct. Deer Park, N.Y. 11729
---------------------------------------- ---------
(Address of principal executive offices) (zip code)
516-586-7500
(Registrant's telephone number, including area code)
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.
[x] YES [ ] NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. On August 13, 1996
there were 7,397,365, shares outstanding of the registrant's common stock.
<PAGE>
KRANTOR CORPORATION
FORM 10-Q
JUNE 30, 1996
TABLE OF CONTENTS
PART I: FINANCIAL INFORMATION Page
Balance sheets as of June 30, 1996
(Unaudited) and December 31, 1995 2 - 3
Statements of Operations for the six
months ended June 30, 1996 (Unaudited) 4
Statements of Operations for the three
months ended June 30, 1996 (Unaudited) 5
Statements of Cash Flows for the six month
period ended June 30, 1996 (Unaudited) 6 - 7
Notes to Financial Statements 8 - 9
Management's Discussion and Analysis of
Financial Condition and Results of Operation 10 - 12
Forward Looking Information and Cautionary
Statements 13 - 14
PART II: OTHER INFORMATION
Item VI: Exhibits and Reports on Form 8-K 15
<PAGE>
KRANTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1996
June 30, December 31,
1996 1995
------------- ------------
(Unaudited)
ASSETS
Current Assets:
Cash $ 2,139 370,000
Marketable Securities 2,871 13,871
Accounts Receivable - Net of allowance for
doubtful accounts of $137,000 and
$ 313,000, respectively 4,822,614 9,465,511
Inventory 2,086,023 6,432,981
Due From officers, employees & shareholders 33,593 111,305
Other Current Assets 1,499,502 552,816
------------- ------------
Total Current Assets 8,446,742 16,946,484
------------- ------------
Property and Equipment - Net 902,724 834,118
------------- ------------
Advances to related parties - 228,718
Deferred Taxes 1,401,780 166,103
Deferred Costs 62,479
Other Assets 54,900 143,051
------------- ------------
Total Other Assets 1,519,159 537,872
------------- ------------
Total Assets $ 10,868,625 $ 18,318,474
============= ============
See Accompanying Notes to Consolidated Financial Statements
2
<PAGE>
KRANTOR CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------- ------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current Liabilities:
Notes Payable (Note 4) $ 3,926,101 $ 4,621,248
Accounts Payable & Accrued Expenses 2,033,582 6,390,375
Income taxes payable 307,854
------------- -------------
Total Current Liabilities 5,959,683 11,319,477
Notes Payable after one year 50,000 50,000
Commitments and Contingencies
Stockholders' Equity (Note 5) - -
Class A $2.20 Cumulative Preferred stock
- $.001 par value; 100,000 shares
authorized, Issued and
Outstanding (Note 3) 100 100
Common stock - $.001 par value;
14,900,000 Shares authorized 5,374 4,950
Additional Paid-in Capital 9,555,00 8,591,758
Accumulated Deficit (4,534,039) (1,480,311)
------------- -------------
5,026,442 7,116,497
Less treasury stock at cost, 35,000 share ( 167,500) (167,500)
------------- -------------
Total stockholders' equity 4,858,942 6,948,997
Total Liabilities & Shareholder's Equity $ 10,868,625 $ 18,318,474
============ =============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
KRANTOR CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------------- ------------
<S> <C> <C>
Sales (Note 7) $ 5,836,991 $ 21,024,043
Cost of Sales 5,356,548 18,473,199
-------------- ------------
Gross Profit 480,443 2,550,844
Selling General and Administrative Expenses 220,728 1,460,190
Depreciation and Amortization 222,330 69,486
-------------- ------------
Operating Income 37,385 1,021,168
-------------- ------------
Other Income (Expense):
Miscellaneous Income (Expense) ( 10,848) 89,108
Interest Expense (197,177) (159,297)
Financing Costs - (47,523)
-------------- ------------
Total Other Expense (208,025) (117,712)
============== ============
Income (Loss) From Continuing Operations
Before Income Taxes ( 170,640) 903,456
Income Taxes (Benefit) ( 56,000) 297,000
-------------- ------------
Income (Loss) from Continuing Operation $ ( 114,640) $ 606,456
============== ============
Discontinued Operations (Note 7)
Loss From Discontinued
Operation (less applicable income taxes of $ (1,448,000)) (2,939,088) -
-------------- ------------
Net Income (Loss) (3,053,728) 606,456
============== ============
Income (Loss) Applicable to Common Stock $ (3,163,728) $ 601,456
============== ============
Earnings (Loss) Per Common Share From
Continuing Operations $ (.04) $ .13
Loss Per Common Share From
Discontinued Operations (.59) -
-------------- ------------
Earnings (Loss) Per Common Share $ (.63) $ .13
============== ============
Weighted Average Number of Shares Outstanding 5,059,228 4,752,982
</TABLE>
Unaudited - See Notes To Consolidated Financial Statements
4
<PAGE>
KRANTOR CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------------- ------------
<S> <C> <C>
Sales (Note 7) $ 1,057,319 $ 10,793,691
Cost of Sales 952,932 9,394,546
-------------- -------------
Gross Profit 104,387 1,399,145
Selling General and Administrative Expenses 38,671 789,435
Depreciation and Amortization 73,915 34,614
-------------- -------------
Operating Income (Loss) ( 8,199) 575,096
-------------- -------------
Other Income (Expense):
Miscellaneous Income (Expense) ( 9,839) 39,024
Interest Expense ( 94,142) (85,032)
Financing Costs - (23,760)
-------------- -------------
Total Other Expense ( 103,981) ( 69,768)
============== =============
Income (Loss) From Continuing Operations
Before Income Taxes ( 112,180) 505,328
Income Taxes (benefit) ( 37,000) 167,000
-------------- -------------
Income (Loss) From Continuing Operation $ ( 75,180) $ 338,328
============== =============
Discontinued Operations (Note 7)
Loss from Discontinued
Operations (Less Applicable Income Taxes
of $ (1,367,945)) (2,768,448) -
-------------- -------------
Net Income (Loss) (2,843,628) 338,328
============== =============
Income (Loss) Applicable to Common Stock $ (2,898,628) $ 338,328
============== =============
Earnings (Loss) Per Common Share From
Continuing Operations $ (.02) $ .07
Earnings (Loss) Per Common Share From
Discontinued Operations (.54) -
-------------- -------------
Earnings (Loss) Per Common Share $ (.56) $ .07
============== =============
Weighted Average Number of Shares Outstanding 5,136,015 4,779,257
</TABLE>
Unaudited - See Notes To Consolidated Financial Statements
5
<PAGE>
KRANTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------------- -------------
<S> <C> <C>
Cash Flows From Operating Activities:
Income (Loss) From Continuing Operations $( 114,640) $ 606,456
Income (Loss) From Discontinued Operations ( 2,939,088) -
Adjustments to Reconcile Net Income (Loss)
From Continuing Operations to Net Cash
Flows From Continuing Operating Activities:
Depreciation and Amortization 110,976 69,486
Amortization of Financing Costs - 46,805
Non-Cash Expenses - 34,773
Provision for Bad Debts ( 176,000) -
Changes in Operating Assets and Liabilities:
Purchase of Marketable Securities - ( 463,318)
Sales of Marketable Securities 11,000 302,331
Accounts Receivable 4,818,897 (2,383,174)
Inventory 4,346,958 (1,544,605)
Prepaid Expenses - ( 17,341)
Deferred Taxes ( 1,235,677) 232,887
Other Current Assets ( 946,686) -
Other Assets 88,151 84,099
Accounts Payable ( 4,356,793) 1,505,404
Accrued Expenses - ( 23,427)
Income Taxes Payable ( 307,854) 49,741
-------------- -------------
Net Cash Flows (Used)
Operating Activities ( 700,756) ( 1,499,883)
Cash Flows From Investing Activities:
Purchase of Furniture and Equipment ( 179,582) ( 19,150)
Advances To Related Parties 228,718 ( 85,208)
Due From Officers and Shareholders 77,712 ( 35, 521)
Deferred Costs - ( 22,941)
-------------- -------------
Net Cash Flows (Used)
Investing Activities 126,848 ( 162,820)
Cash Flows From Financing Activities:
Net Borrowing (Payments) on Notes Payable ( 695,147) 1,518,020
Proceeds from Insurance of Common Stock 1,073,673 -
Cash Dividends on Preferred Stock ( 110,000) ( 5,000)
Deferred Costs ( 62,479) -
Expenses Related to Sale of Stock - ( 80,244)
-------------- -------------
Net Cash Flows Provided by
Financing Activities 206,047 1,432,776
-------------- -------------
Net Increase ( Decrease) in Cash ( 367,861) ( 229,927)
Cash - Beginning of Period 370,000 502,797
-------------- -------------
Cash - End of Period $ 2,139 $ 272,870
============== =============
</TABLE>
6
<PAGE>
KRANTOR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------------- -------------
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Period for:
Interest
Continuing Operation $ 197,177 $ 159,297
Discontinued Operation 64,951
============== =============
Income Taxes
Continuing Operations $ ( 56,000 $ 297,000
Discontinued Operations ( 1,448,000)
============== =============
Supplemental Disclosure of Non-Cash Operating,
Investing and Financing Activities:
Expenses paid via the distribution of registered
shares of the Company's Common Stock
through it's Compensation and Services Plan - 34,773
Prepaid Expenses paid via the distribution of
registered shares of the Company's Common
Stock through it's Compensation and Services Plan - 50,675
Deferred Costs paid via the distribution of registered
shares of the Company's Common Stock through its
Compensation and Services Plan - -
Changes to additional-paid-in capital related to
distribution of registered shares of the Company's
Common Stock through its Compensation and
Services Plan - -
-------------- -------------
Total Non-Cash Operating, Investing and
Financing Activities $ 85,448
============== =============
</TABLE>
Unaudited - See Notes to Consolidated Financial Statements
7
<PAGE>
KRANTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1996
Note 1 - Basis of Presentation:
The December 31, 1995 balance sheet represents the prior year's audited
balance sheet and is presented for comparative purposes. In the opinion of
management, all adjustments which include only normal recurring adjustments
necessary to present fairly the financial position, results of operations and
cash flows for all periods presented have been made to the unaudited interim
financial statements. The results of operations for interim periods are not
necessarily indicative of the operating results for the full year. Footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting practices have been omitted in accordance
with the published rules and regulations of the Securities and Exchange
Commission. These consolidated financial statements should be read in
conjunction with the financial statements and notes thereto for the most recent
year end.
Note 2 - Summary of Significant Accounting Policies:
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company, Island Wholesale Grocers, Inc. (IWG), its
wholly owned subsidiary, formed in April, 1994 and Island Frozen & Dairy (IFD)
formed in May, 1995 (See Note 7). All significant intercompany accounts and
transactions have been eliminated in consolidation.
Net Income Per Common Share - Net income per common share is based on
the weighted average number of common shares outstanding during the periods.
When losses are incurred, warrants and options are not included since the effect
would dilute loss per share. When net income is reported, warrants and options
are included using the treasury stock method, when exercise prices are less than
the average market price.
Inventory - Inventory, consisting entirely of finished goods is stated
at the lower of cost or market determined by the first in, first-out method.
Note 3 - Preferred Dividends:
Dividends on the preferred stock in the amount of $55,000 for the three
months ending June 30, 1996 were declared and caused to be paid in common stock.
Note 4 - Revolving Line of Credit:
The Company finances its receivables through a loan and security
agreement with a lender. Under the terms of the agreement, the Company receives
cash advances of up to eighty percent of its eligible accounts receivable, as
defined. The proceeds from collections of the eligible accounts receivable are
used to reduce the loan balance. On May 14th the Company amended the loan
agreement with the Lender to include financing Island Frozen & Dairy, increased
its line to $8,000,000 and extended the maturity to November 14, 1997.
Note 5- Shareholders Equity:
In the 2nd quarter of 1996, the Company issued 388,821 shares of the
Company's common stock pursuant to the terms of the 1994 Services and Consulting
Compensation Plan.
Note 6 - Related Party Transactions:
There were no sales to related parties during the first six months of
1996 and 1995. Purchases from related parties during the first six months of
1996 and 1995 were approximately $307,000 and $ 950,000 respectively.
8
<PAGE>
KRANTOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1996
Note 7 -Discontinued Operations
On June 30, 1996 the Company discontinued its Kosher Food business
operated through IFD. All assets and applicable liabilities have been
consolidated into the Company's balance sheet. Applicable financing costs and
operating expenses were allocated to the loss from discontinued operations in
the consolidated statement of income. The Consolidated Balance Sheet from
discontinued operations includes (IFD) $4,362,000 of current assets and
3,115,000 in current liabilities excluding intercompany accounts.
The results of discontinued operations are summarized as follows:
June 30, 1996
-------------
Net Sales $ 12,826,040
============
Loss from discontinued operations before
income taxes $( 4,387,088)
Income taxes (credit) 1,448,000
-------------
Loss from discontinued operations $ (2,939,088)
============
The above results for 1996 are through the end of the second quarter
when the decision was made to dispose of IFD. Operating results of discontinued
operations include allocations of overhead and interest expense. Overhead
expense of $2,148,189 was allocated based upon determination of those costs
which were not expected to be incurred by continuing operations after closing.
Financing costs of $542,381 were allocated based on debt incurred to finance the
discontinued operations since acquisition.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company is a distributor of promotional brand-name grocery, general
merchandise, Health and Beauty Aids & Frozen Seafood (IWG). The Company
discontinued its Kosher Food business (IFD) on June 30, 1996. (See Note 7 to
Consolidated Statements). The Company's current assets consist primarily of
accounts receivable, inventory, equipment, prepaid expenses and cash. The
Company's liabilities consist of accounts payable and short term debt used to
finance accounts receivable.
Revenues from continued operations decreased for the six months ended
June 30, 1996 to $5,836,991 a (72%) decrease as compared to the prior period.
Revenues from discontinued operations (IFD) for the period totaled $12,852,527.
Total revenues for the combined business would have been $18,689,518 an 11%
decrease from the prior period (See Note 7 to Consolidated Financial
Statements). The decrease in revenues is related to discontinuing IFD's
business, and the lack of sufficient working capital to maintain continuing
operations, due to the financial requirements of IFD. The redirection of capital
to continuing operations (IWG) should allow the core grocery and seafood
business to expand to Fiscal 1995 levels; although additional capital may be
required (See Liquidity and Capital Resources).
Cost of sales for continued operations decreased for the quarter ended
June 30, 1996 to $ 5,356,548 or (71 %) decrease as compared to the prior year.
This decrease was primarily attributable to the decrease in the Company's
revenues (See Note 7 to Consolidated Financial Statements). The Company's gross
profit from continuing operations decreased from 12% to 8% in the same period.
Selling General & Administrative (SG&A) expenses from continuing
operations decreased to $220,728 for the period an 85% decrease. This decrease
is related to lower revenues from continued operations. SG&A as a percentage of
sales for continued operation decreased from 7% to 4% for the same period.
Loss from continued operations totaled $114,640 for the period as
compared to $606,456 profit for the same period. This decrease is related to a
72% drop in revenues from continuing operations. Loss from discontinued
operations totaled $2,939,088. This loss is a one time change to earnings
attributable to discontinuing IFD's operations (See Note 7 to Consolidated
Financial Statements).
10
<PAGE>
Liquidity and Capital Resources
As a result of the Company's recent expansion into the wholesale
segment of the food distribution industry and the high levels of inventory
needed to operate successfully in that segment, the Company has been
experiencing cash flow shortages. In particular, the Company has incurred
significant costs in connection with discontinuing Island Frozen & Dairy's (IFD)
operations. Another reason for the Company's cash flow shortages is the manner
in which its inventory was converted into sales. Although most of the Company's
customers are required to pay within thirty days of product delivery, IFD, for
competitive reasons, made advance purchases of inventory in order to quickly
meet retail demand and take advantage of promotional buying opportunities. In
addition IFD experienced significant collection problems from its customers and
delays in receiving rebates and allowances from its vendors. These factors
extend the time between the original purchase of goods from manufacturers and
the eventual cash collection from its retail customers to a period which is well
beyond acceptable terms. The Company is continuing to collect its outstanding
IFD receivables and sell its remaining inventory. The Company believes that
within 90 days the assets of IFD should be fully converted (See Note 7 to
Consolidated Statements).
Working capital decreased by 56% to $2,487,000 while inventory and
payables both decreased by 68% for the period. These changes reflect the working
capital position of the Company after the one time loss from discontinued
operation. The Company believes that it has sufficient working capital to fund
its continuing operations but requires additional financing to expand.
Continuing operations will be conducted through Island Wholesale Grocers (IWG),
the promotional grocery and seafood subsidiary of Krantor.
The Company's receivables for the first six months decreased by 49 % to
$4,822,614. The reduction in receivables is primarily attributable to a decrease
in revenues by Krantor Corporation and Island Wholesale Grocers in order to
finance the working capital requirements of Island Frozen & Dairy. Receivables
should increase for IWG's business and decrease for IFD as receivables are
collected.
The Company plans on expanding its core grocery and frozen seafood
market through IWG. Krantor believes that by discontinuing IFD's operation it
should enable it to support the capital requirements of its continuing operation
through IWG. However, the Company believes it will need additional financing in
the form of subordinated debt or equity to finance its expansion plans. See
"Forward-Looking Information and Cautionary Statements." The Company has
consolidated its agreements with two lending institutions through a single
agreement with one of those institutions. The current consolidated lending
facility provides for a total of $8 million from Fidelity Funding of California,
Inc. ("Fidelity"). Under the facility, the Company may borrow up to the lesser
of $8 million or 80% of eligible accounts receivables. This line funds sales
activities for Krantor Corporation and its wholly owned subsidiaries, IWG and
IFD (which has been discontinued on June 30, 1996).
As of June 30, 1996, the Company had approximately $4,074,000 available
under the facility for additional borrowing subject to the borrowing formula.
The facility, which expires in November 1996, was extended on May 11, 1996
through November 14, 1997 by Fidelity.
Management is not aware of negative trends in the Company's area of business or
other economic factors which may cause a significant change in the Company's
viability or financial stability, except as specified herein and in
"Forward-Looking Information and Cautionary Statements." Management has no plans
to alter the nature of its business, other than by discontinuing its Kosher
frozen food business (IFD).
11
<PAGE>
Liquidity and Capital Resources (cont'd)
Subject to available financing, the Company intends to further expand its
continuing business by purchasing and maintaining short-term inventories of well
accepted, readily marketable promotional brand-name grocery products and frozen
seafood. The Company believes that by warehousing these products it will be able
to make larger purchases during manufacturers' promotional periods, gain better
access to some product promotions ordinarily reserved for higher volume
purchasers, increase sales by having more inventory available for shipment on
demand, and thereby expand its customers and supplier base. The Company also
plans to significantly expand its seafood business in the third and fourth
quarters of 1996. As a result of this contemplated expansion, the Company
believes it can obtain better margins on its sale of Frozen Seafood products.
However, there can be no assurance that the Company's proposed expansion plan
will be successful. The Company needs to enhance its leverage so that it can
expand. Additional working capital is required beyond the current available
financing in order for the Company to expand from its current levels.
Seasonality
Seasonality affects the demand for certain products sold by the
Company, such as juice drinks in the summer months or hot cereals in fall and
winter months. However, all these products are available to the Company
throughout the year. Manufacturers also tend to promote more heavily towards the
close of the fiscal quarters and during the spring and early summer months.
Accordingly, the Company is able to purchase more product and increase sales
during these periods and reduce its product cost due to these promotions. The
Company generally experiences lower sales volume in the fourth quarter due to
the reduced number of selling days resulting from the concentration of holidays
in the quarter. Sale of frozen seafood is more significant in the third and
fourth quarters due to the seasonal catch which occurs in the second quarter.
Inflation
The Company believes that inflation, under certain circumstances, could
be beneficial to the Company's business. When inflationary pressures drive
product costs up, the Company's customers sometimes purchase greater quantities
of product to expand their inventories to protect against further pricing
increases. This enables the Company to sell greater quantities of products that
are sensitive to inflationary pressures.
Additionally, inflationary pressures frequently increase interest
rates. Since the Company is dependent on financing, any increase in interest
rates will increase the Company's credit costs, thereby reducing its profits
unless these additional credit costs can be passed on to the Company's
customers.
12
<PAGE>
Forward Looking Information and Cautionary Statements
Other than the factual matters set forth herein, the matters and items
set forth in this report are forward- looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, the following:
1. Cash Flow.
The Company has experienced cash shortages which continue to
adversely affect its business. See "Liquidity and Capital
Resources".
2. Dependence on Public Trends.
The Company's business is subject to the effects of changing
customer preferences and the economy, both of which are
difficult to predict and over which the Company has no
control. A change in either consumer preferences or a
down-turn in the economy may affect the Company's business
prospects.
3. Potential Product Liability.
As a participant in the distribution chain between the
manufacturer and consumer, the Company would likely be named
as a defendant in any products liability action brought by a
consumer. To date, no claims have been asserted against the
Company for products liability; there can be no assurance,
however, that such claims will not arise in the future.
Accordingly, the Company maintains a products liability of
$10,000,000 per occurrence. In the event that any products
liability claim is not fully funded by insurance, and if the
Company is unable to recover damages from the manufacturer or
supplier of the product that caused such injury, the Company
may be required to pay some or all of such claim from its own
funds. Any such payment could have a material adverse impact
on the Company.
4. Reliance on Common Carriers.
The Company does not utilize its own trucks in its business
and is dependent, for shipping of product purchases, on common
carriers in the trucking industry. Although the Company uses
several hundred common carriers, the trucking industry is
subject to strikes from time to time, which could have
material adverse effect on the Company's operations if
alternative modes of shipping are not then available.
Additionally the trucking industry is susceptible to various
natural disasters which can close transportation lanes in any
given region of the country. To the extent common carriers are
prevented from or delayed in utilizing local transportation
lanes, the Company will likely incur higher freight costs due
to the limited availability of trucks during any such period
that transportation lanes are restricted.
13
<PAGE>
Forward Looking Information and Cautionary Statements
5. Competition.
The Company is subject to competition in both its promotional
and seafood businesses. While both industries are highly
fragmented, with no one distributor dominating the industry,
the Company is subject to competitive pressures from other
distributors based on price and service.
6. Discontinued Operation.
The Company has experienced a significant one time loss in
discontinuing its Kosher Food business (IFD). This loss
materially reduced the Company's working capital position.
(See Liquidity & Capital Resources). The Company needs
additional capital to expand its core grocery and frozen
seafood business (IWG). Without additional capital the Company
would not be able to utilize the maximum availability under
its loan agreement to finance its contemplated expansion.
7. Litigation
The Company has commenced a business interference lawsuit
against a major secured vendor of IFD & Krantor claiming
damages that directly relate to the discontinuation of IFD's
business. The secured vendor has also commenced an action for
trade debt in the amount of $450,000. The company is defending
the action. These actions have an effect on the company's
borrowing facilities and until they are resolved the company's
borrowing availability under its loan agreements may be
limited.
14
<PAGE>
Part II- Other Information
Item 6- Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) There were no reports filed on Form 8-K for the relevant period
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
KRANTOR CORPORATION
/S/ Mair Faibish
Date 8/19/96 ----------------------------
-------------------- By Mair Faibish
Chief Financial Officer
/S/ Mitchell Gerstein
Date 8/19/96 ----------------------------
-------------------- By Mitchell Gerstein
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000870228
<NAME> KRANTOR CORP.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,139
<SECURITIES> 2,871
<RECEIVABLES> 4,822,614
<ALLOWANCES> 0
<INVENTORY> 2,086,023
<CURRENT-ASSETS> 8,446,742
<PP&E> 902,724
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,868,625
<CURRENT-LIABILITIES> 5,959,683
<BONDS> 0
0
100
<COMMON> 5,374
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,868,625
<SALES> 5,836,991
<TOTAL-REVENUES> 5,836,991
<CGS> (5,356,548)
<TOTAL-COSTS> (443,058)
<OTHER-EXPENSES> (208,025)
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</TABLE>
