<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[_] 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 1-13260
SILVERADO FOODS, INC.
(Exact name of registrant as specified in its charter)
OKLAHOMA 73-1369218
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6846 SOUTH CANTON, SUITE 110, TULSA, OKLAHOMA 74136
(Address of principal executive offices)
(918) 496-2400
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
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 field such reports), and (2) has been subject to such filing
requirements of the past 90 days.
Yes [X] No [_]
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 8, 1998
----- --------------------------
Common Stock, $.01 Par Value 15,086,879
<PAGE>
PART I
FINANCIAL
INFORMATION
2
<PAGE>
SILVERADO FOODS, INC. AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------- --------------
ASSETS 1998 1997
------ ---- ----
(UNAUDITED)
-----------
<S> <C> <C>
CURRENT ASSETS:
Cash 601 $ 56,359
Accounts receivable, net 2,319,053 2,689,893
Inventories, net 1,240,876 1,204,321
Prepaid expenses and other 435,808 365,069
------------ ------------
Total current assets 3,996,338 4,315,642
------------ ------------
NET ASSETS HELD FOR SALE 2,108,043 2,835,459
NOTES RECEIVABLE 1,133,582 1,178,582
PROPERTY, PLANT AND EQUIPMENT, net 6,904,595 7,086,488
GOODWILL AND OTHER INTANGIBLES, net 3,194,840 5,492,027
------------ ------------
Total assets $ 17,337,398 $ 20,908,198
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt 14,103,154 $ 14,257,040
Short-term notes payable 475,000 500,000
Trade accounts payable 5,418,622 4,516,522
Accrued liabilities 3,062,910 3,291,737
Other liabilities 290,273 274,283
------------ ------------
Total current liabilities 23,349,959 22,839,582
------------ ------------
LONG-TERM DEBT, less current maturities 5,565,032 5,360,086
OTHER 39,110 40,967
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT
Common stock, $.01 par value, 20,000,000 shares authorized 117,018 117,018
11,701,757 issued, 11,674,762 outstanding
Warrants 51,159 46,549
Additional paid-in-capital 28,910,127 28,843,461
Accumulated deficit (40,630,355) (36,274,813)
------------ ------------
(11,552,051) (7,267,785)
Less: Treasury stock (64,652) (64,652)
------------ ------------
Total shareholders' deficit (11,616,703) (7,332,437)
------------ ------------
Total liabilities and shareholders' deficit $ 17,337,398 $ 20,908,198
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
SILVERADO FOODS, INC. AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------
1998 1997
---- ----
<S> <C> <C>
NET SALES $ 5,179,117 $ 5,714,703
COST OF SALES 3,460,355 4,767,167
----------- -----------
Gross profit 1,718,762 947,536
----------- -----------
OPERATING EXPENSES:
General and administrative 664,181 977,882
Selling and marketing 996,014 1,271,272
Depreciation 37,193 30,722
Amortization of goodwill and other intangibles 190,574 205,781
Loss on adjustment to carrying value 2,125,443 --
----------- -----------
4,013,405 2,485,657
----------- -----------
OPERATING LOSS (2,294,643) (1,538,121)
OTHER INCOME (EXPENSE):
Interest (637,873) (383,469)
Accretion of debenture discount (66,666) (1,150,000)
Other, net (6,620) (3,785)
----------- -----------
(711,159) (1,537,254)
----------- -----------
LOSS FROM CONTINUING OPERATIONS (3,005,802) (3,075,375)
DISCONTINUED OPERATIONS
Operating Loss (118,727) (528,327)
Loss on Disposal (1,231,013) --
----------- -----------
LOSS FROM DISCONTINUED OPERATIONS (1,349,740) (528,327)
----------- -----------
NET LOSS $(4,355,542) $(3,603,702)
=========== ===========
BASIC LOSS PER SHARE FROM:
CONTINUING OPERATIONS $ (0.20) $ (0.42)
DISCONTINUED OPERATIONS (0.01) (0.07)
LOSS ON DISPOSAL (0.08) --
=========== ===========
NET LOSS PER SHARE $ (0.29) $ (0.49)
=========== ===========
DILUTED LOSS PER SHARE FROM:
CONTINUING OPERATIONS $ (0.26) $ (0.42)
OPERATING LOSS FROM DISCONTINUED OPERATIONS (0.01) (0.07)
LOSS ON DISPOSAL (0.11) --
----------- -----------
NET LOSS PER SHARE $ (0.38) $ (0.49)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
SILVERADO FOODS, INC. AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
------------------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
------------ -------------- ADDITIONAL
NUMBER NUMBER PAID-IN ACCUMULATED
OF SHARES AMOUNT OF SHARES AMOUNT WARRANTS CAPITAL DEFICIT TOTAL
--------- ------ --------- ------ -------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 11,701,757 117,018 (26,995) (64,652) 46,549 28,843,461 (36,274,813) (7,332,437)
Accretion of Debenture Discount - - - - - 66,666 - 66,666
Issuance of warrants - - - - 4,610 - - 4,610
Net loss - - - - - - (4,355,542) (4,355,542)
-------------------------------------------------------------------------------------------
BALANCE, MARCH 31, 1998 11,701,757 117,018 (26,995) (64,652) 51,159 28,910,127 (40,630,355) (11,616,703)
===========================================================================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE>
SILVERADO FOODS, INC. AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDING MARCH 31,
-----------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(4,355,542) $(3,603,702)
----------- -----------
Adjustments to reconcile net loss to cash used in operating activities--
Depreciation and amortization 379,047 525,370
Accretion of debenture discount 66,666 1,150,000
Loss on sale of assets 1,231,013 --
Loss on adjustment to carrying value 2,125,443 --
Change in assets and liabilities, net of effect of acquisitions
(Increase) decrease in accounts receivable 370,840 831,581
(Increase) decrease in inventory (36,555) 474,965
(Increase) decrease in prepaid expenses and other (70,739) (306,842)
Increase in assets held for disposal (1,111,635) (209,214)
Increase (decrease) in payables and accrued liabilities 673,273 (483,439)
(Increase) decrease in intangibles and other 54,293 31,902
----------- -----------
Total adjustments 3,681,646 2,014,323
----------- -----------
Cash used in operating activities (673,896) (1,589,379)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of businesses 608,038 --
Capital expenditures (14,900) (627,726)
----------- -----------
Cash provided by (used in) investing activities 593,138 (627,726)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from long-term debt 300,000 3,263,709
Payments on notes payable and long-term debt (275,000) (601,968)
----------- -----------
Cash provided by financing activities 25,000 2,661,741
----------- -----------
NET INCREASE (DECREASE) IN CASH (55,758) 444,636
CASH, beginning of period 56,359 164,118
----------- -----------
CASH, end of period $ 601 $ 608,754
=========== ===========
Non-cash Financing Activities:
Issuance of stock for debenture conversion $ -- $ 694,293
Addition to paid-in-capital for debenture discount accretion 66,666 1,150,000
Debenture conversion to paid in capital -- 750,248
SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash paid for-
Interest $ 263,653 $ 253,718
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
6
<PAGE>
SILVERADO FOODS, INC. AND SUBSIDIARIES
--------------------------------------
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. GENERAL:
The accompanying consolidated financial statements have been prepared by
Silverado Foods, Inc. (the "Company") without audit and should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto included in the Company's annual report and Form 10-K as of December 31,
1997. The foregoing financial statements include only normal recurring accruals
and all adjustments which the Company considers necessary for a fair
presentation.
2. DETAILS TO CONSOLIDATED BALANCE SHEETS:
Inventories consist primarily of finished goods and packaging supplies, which
are stated at the lower of cost (first-in, first-out basis) or market as
follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------ -------------
<S> <C> <C>
Raw Materials $ 912,160 $ 908,105
Finished Goods 440,192 370,192
---------- ----------
1,352,352 1,278,297
Less: Allowance for excess and
obsolete inventory (111,476) (73,976)
---------- ----------
$1,240,876 $1,204,321
========== ==========
</TABLE>
3. LOSS PER SHARE:
For the three months ended March 31, 1998 and March 31, 1997, the basic loss per
share calculation includes the weighted average number of shares outstanding for
the period which were 15,276,347 and 7,327,740 respectively. The weighted
average number of shares calculated for the diluted loss per share were
11,701,757 and 7,327,740 for the three months ended March 31, 1998 and 1997
respectively. Included in the basic loss per share are 3,574,590 contingent
shares related to fulfillment of a stock price guarantee.
7
<PAGE>
4. FINANCIAL CONDITION AND MANAGEMENT PLANS:
The accompanying financial statements have been prepared on a going concern
basis, which assumes the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the consolidated
financial statements, the Company has a deficit in retained earnings of
approximately $40,600,000 and a deficit in stockholders' equity of approximately
$11,600,000. These conditions have combined to create a working capital deficit
of approximately $19,400,000 at March 31, 1998.
As discussed in Note 5, management recently announced that the Company had
entered into a letter of intent regarding a transaction with LF Capital Partners
LLC whereby LF Capital Partners LLC will acquire 90% of the Nonni's biscotti
business for $32 million. The Company also has plans to sell other assets.
Management believes that these actions, combined with improved operations in the
first quarter of 1998, will provide sufficient liquidity to meet its obligations
through December 31, 1998 and to continue as a going concern.
On April 10, 1998, the Company factored certain accounts receivable and used a
portion of those proceeds to reduce the amounts owed under the $7,000,000
revolving line of credit to $6,000,000. In addition, the remaining $6,000,000
on the revolving line of credit was assumed by the Company's Chairman and his
spouse, and in connection with such assumption, the bank released its
collateral. The Company simultaneously agreed to repay the $6,000,000 assumed
by the Company's Chairman and his spouse by signing a note payable due in August
1998; however, if excess cash is not available to repay the note, the due date
will be extended.
5. SUBSEQUENT EVENT
On April 6, 1998, the Company announced that it had entered into a letter of
intent regarding a transaction whereby LF Capital Partners LLC, an affiliate of
the investment banking firm Lazard Freres & Co. LLC, will acquire 90% of the
Company's Nonni's(R) biscotti business in a recapitalization. This preliminary
agreement includes all of the Nonni's assets, including the brand, the equipment
owned at the Tulsa, Oklahoma production facilities, the distribution rights, and
other brands used for the biscotti products. The value to be received by the
Company in the proposed transaction is $32,000,000, including approximately
$26,250,000 in cash at closing (subject to adjustments), $1,250,000 in a
minority investment in the common equity of the Nonni's entity that the Company
would retain, and $4,500,000 in an earn-out agreement based on future earnings.
As part of this agreement, Tim Bruer, the Company's president and chief
executive officer, Dorvin Lively, vice-president and chief financial officer, as
well as most other members of the Company's management, will transfer to the new
Nonni's Entity.
Management intends to use the proceeds from the sale to pay bank debt, the
borrowings from the Company's Chairman, other notes payable, and other
obligations of the Company.
8
<PAGE>
Also on April 6, 1998, the Company has decided to sell the remaining operations
of its specialty baked goods segment, including the bagel bar and pound cake
product lines. During May 1998, the Company entered into discussions with
potential purchasers. Based upon those negotiations, management has recorded a
writedown of approximately $2,125,000 to properly reflect the assets at their
fair value.
Once all of the current businesses are divested management will evaluate other
alternatives, which include, but are not limited to, acquisitions, mergers or
liquidations of its remaining assets to shareholders.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
---------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
RESULTS OF OPERATIONS
The continuing operations information excludes the results from operations
of the Company's snack tray business which was discontinued in the fourth
quarter of 1997, the Company's non-snack tray direct store delivery business
located in southern California, and the Company's mail order business which was
sold in the third quarter of 1997. No income tax benefit has been recognized in
connection with these discontinued operations due to the Company's net operating
loss carry forward position. The following discussion and analysis should be
read in conjunction with the Company's Consolidated Financial Statements and
notes thereto. The following table presents, as a percentage of net sales,
certain selected financial data for the Company for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
------------
1998 1997
---- ----
<S> <C> <C>
Net Sales 100% 100%
Gross Profit 33 17
General and Administrative 13 17
Selling and Marketing 19 22
Depreciation and Amortization of Intangibles 4 5
Loss on Adjustment to Carrying Value 41 -
Operating Loss (44) (27)
Interest and Other (14) (27)
Net Loss from Continuing Operations (58) (54)
Discontinued Operations (26) (9)
Net Loss (84) (63)
</TABLE>
PERIOD TO PERIOD COMPARISONS FOR THE THREE MONTHS ENDED MARCH 31, 1998 COMPARED
TO THE THREE MONTHS ENDED MARCH 31, 1997
Net Sales. Consolidated net sales decreased 9% from $5,715,000 to $5,179,000.
However, during this period, Nonni's biscotti sales increased 57% from
$2,358,000 to $3,695,000. This increase was driven by revenue increases and new
product offerings in the wholesale clubs. Offsetting this increase was a decline
in sales of the snack brands of $405,000 and a decline in bagel bar sales of
$1,669,000. Bagel bar sales declined due to a planned reduction in the number of
product demonstrations for the bagel bar brands in the wholesale clubs during
the first quarter of 1998 and from the Company exiting unprofitable bagel bar
markets.
10
<PAGE>
Gross Profit. Gross profit for the three months ended March 31, 1998 was
$1,719,000, an 81% increase over the comparable period in 1997 of $948,000.
Gross profit as a percentage of net sales increased to 33% from 17%. This
consisted of a 147% increase in biscotti gross profit, and a 4% increase in
bagel bar gross profit. This increase was due to a number of cost-saving
initiatives implemented by management, improved product pricing, exiting
unprofitable markets, and improved manufacturing efficiencies.
General and Administrative. General and administrative expenses decreased as a
percentage of net sales from 17% to 13% and decreased from $978,000 to $665,000.
The decrease was due to the Company's consolidation of manufacturing facilities
and centralizing certain general and administrative functions.
Selling and Marketing. Selling and marketing expenses decreased from $1,271,000
to $996,000 over the comparable period of 1997, a decrease of $275,000 and
decreased as a percentage of net sales from 22% to 19%. This decrease was driven
by decreased demonstrations for the bagel bar brands in the wholesale clubs
during the first quarter of 1998 as sales from these brands decreased by 53%
over the first quarter of 1997.
Depreciation and Amortization of Intangibles. Depreciation and amortization of
goodwill and other intangibles remained flat at $236,000 for the quarter ended
March 31, 1998 as compared to the same quarter of 1997. Depreciation included in
cost of sales for the quarter ended March 31, 1998 and March 31, 1997 was
$151,000 and $122,000 respectively.
Loss on Adjustment to Carrying Value. Loss on adjustment to carrying value
represents the write down of net assets related to the bagel bar and pound cake
businesses to their estimated fair value.
Operating Loss. Operating losses increased from $1,538,000 to $2,295,000, an
increase of $737,000. The increase was due to the loss on adjustment to the
carrying value discussed above offset by both higher gross margins during the
three months ended March 31, 1998 as well as lower sales and marketing expenses
and lower general and administrative expenses also discussed above.
Interest and Other. Interest and other expense decreased from $1,537,000 to
$711,000, a decrease of $826,000. The decrease was driven primarily from a
charge of $1,150,000 related to the issuance of certain Regulation S debentures
that occurred in the first quarter of 1997 that had a convertible feature at a
discount to the market price of the common stock of the Company. The overall
decrease in interest and other expense was offset by an increase in interest
expense due to increased debt outstanding from the prior year quarter for
funding working capital requirements.
Loss from Discontinued Operations. Losses of $1,350,000 from discontinued
operations represents the results of the operations of the Company's snack tray
business and an increase in the loss on disposal due to lower than anticipated
net proceeds on businesses which have been sold.
11
<PAGE>
Net Loss. The Company's net loss increased from $3,604,000 to $4,356,000, an
increase of $752,000 over the comparable period for 1997. This increase in net
loss is attributed to the loss recorded on bagel bar and pound cake assets and
was offset by higher gross profits, lower sales and marketing expenses and lower
interest and other expense as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations was $674,000 for the three months ended March
31, 1998 compared to $1,589,000 for the three months ended March 31, 1997. Net
cash provided by investing activities was $593,000 compared to cash used of
$628,000 for the comparable period. Net cash provided by financing activities
during the first three months ended March 31, 1998 totaled $25,000 from net
borrowings on long-term debt.
On April 10, 1998, the Company factored certain accounts receivable and used a
portion of those proceeds to reduce the amounts owed under the $7,000,000
revolving line of credit to $6,000,000. In addition, the remaining $6,000,000
on the revolving line of credit was assumed by the Company's Chairman and his
spouse, and in connection with such assumption, the bank released its
collateral. The Company simultaneously agreed to repay the $6,000,000 assumed
by the Company's Chairman and his spouse by signing a note payable due in August
1998; however, if excess cash is not available to repay the note, the due date
will be extended. Interest is at local bank prime plus 1 1/2% and is
classified as current in the consolidated financial statements. As of May 11,
1998, the Company owes the Chairman and his spouse $12,200,000.
The Company has a $6,000,000 term note with a bank. At March 31, 1998,
$6,000,000 was outstanding and interest is at prime. Interest is payable monthly
and principal payments begin in May 1998, with a final balloon payment due in
May 1999 based on a five-year amortization. This note is collateralized by the
Company's machinery and equipment and is also guaranteed by the Company's
Chairman, his spouse and another family member of the Chairman.
During the first quarter the Company placed $200,000 of debentures (due January
1999 with an interest rate of 8%) pursuant to Regulation S of the Securities Act
of 1933, as amended. These debentures can be converted at any time after a
holding period of 45 days at the lower of (a) 75% of the closing price of the
common stock for the day immediately preceding the conversion date or (b) 75% of
the average of the closing prices of the common stock for the five business days
immediately preceding the date of subscription by the purchaser. These funds
were used for working capital purposes. On April 7, 1998, $50,000 of these
debentures were converted into 94,715 shares of common stock.
The continuing losses from prior years and losses for 1998 combined with start-
up costs, acquisitions and consolidations, have required substantial capital and
have left the Company in a highly leveraged financial position as of March 31,
1998 with most of the
12
<PAGE>
Company's debt classified as current. However, on April 6, 1998, the Company
announced that it had entered into a letter of intent regarding a transaction
whereby LF Capital Partners LLC, an affiliate of the investment banking firm
Lazard Freres & Co. LLC, will acquire 90% of the Company's Nonni's(R) biscotti
business in a recapitalization. This preliminary agreement includes all of
Nonni's assets, including the brand, the equipment owned at the Tulsa, Oklahoma
production facilities, the distribution rights, and other brands used for the
biscotti products. The value to be received by the Company in the proposed
transaction is $32,000,000, including approximately $26,250,000 in cash at
closing (subject to adjustments), $1,250,000 in a minority investment in the
common equity of the Nonni's entity that the Company would retain, and
$4,500,000 in an earn-out agreement based on future earnings. The proceeds from
this transaction will be used to pay all current and long-term debt as well as
other obligations of the Company. This transaction is expected to close during
the third quarter of 1998, but it is subject to the negotiation of a definitive
agreement, as well as shareholder and regulatory approval. Accordingly, there
can be no assurance that the transaction will occur.
The Company also announced on April 6, 1998 that it planned to dispose of its
bagel bar business and its pound cake business located in Santa Ana, California.
The Company believes that such a transaction will be consummated during 1998.
The Company will use the proceeds from the Nonni's sale along with the proceeds
from the disposition of the remaining snack tray operations to satisfy current
obligations of the Company. These proceeds should provide sufficient cash flow
to the Company to pay off all current and long-term debt as well as provide any
necessary working capital for the Company. Prior to the occurrence of the
transaction, it may be necessary for the Company to utilize other short-term
financing to fund its operations.
FORWARD LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition and Results of
Operations include certain statements that may be "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. All
statements in this Form 10-Q, other than statements of historical facts, that
address activities, events or developments that the Company expects, believes or
anticipates will or may occur in the future are forward-looking statements.
Although the Company believes the expectations expressed in such forward-looking
statements are based on reasonable assumptions within the bounds of its
knowledge of its business, such statements are not guarantees of future
performance and actual results or developments may differ materially from those
in the forward looking statements. Forward-looking statements involve risks and
uncertainties including, but not limited to, general economic trends, continued
acceptance of the Company's product in the marketplace, competitive factors,
manufacturing and raw material costs, the Company's dependence upon third-party
suppliers, and other risks detailed from time to time in the Company's periodic
reports filed with the Securities and Exchange Commission. The Company
undertakes no obligation to update publicly any
13
<PAGE>
forward-looking statements, whether as a result of new information, future
events or otherwise.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information regarding legal proceedings, see the Company's Form
10-K for the year ended December 31, 1997.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
As of March 31, 1998, the Company's borrowings on its bank revolving
credit facility exceeded the borrowing base of eligible accounts receivable and
inventories. The principal amount owed by the Company under such revolving
credit facility at March 31, 1998 was $6.75 million. On April 10, 1998, the
Company factored certain accounts receivable and used a portion of those
proceeds to reduce the amounts owed under the $7,000,000 revolving line of
credit to $6,000,000. In addition, the remaining $6,000,000 on the revolving
line of credit was assumed by the Company's Chairman and his spouse, and in
connection with such assumption, the bank released its collateral. The Company
simultaneously agreed to repay the $6,000,000 assumed by the Company's Chairman
and his spouse by signing a note payable due in August 1998; however, if excess
cash is not available to repay the note, the due date will be extended.
Interest is at local bank prime plus 1 1/2% and is classified as current in the
consolidated financial statements. As of May 11, 1998, the Company owes the
Chairman and his spouse $12,200,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.0 Financial Data Schedule
14
<PAGE>
(b) Reports on Form 8-K
(i) Form 8-K was filed February 11, 1998 to report under Item 9
the issuance by the Company of certain convertible
debentures in transactions effected pursuant to Regulation
S.
15
<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 thereunto duly authorized.
Silverado Foods, Inc.
---------------------
Registrant
By:/s/Dorvin D. Lively
-------------------
Dorvin D. Lively
Vice President, Chief Financial
Officer And Secretary (Duly
authorized Officer and Principal
Accounting Officer)
Date: May 15, 1998
16
<PAGE>
INDEX TO EXHIBITS
The following documents are included as exhibits to this Form 10-Q.
Those exhibits below incorporated by reference herein are indicated as such by
the information supplied in the parenthetical thereafter. If no parenthetical
appears after an exhibit, such exhibit is filed herewith.
27.0 Financial Data Schedule
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 601 56,359
<SECURITIES> 0 0
<RECEIVABLES> 2,319,053 2,689,893
<ALLOWANCES> 0 0
<INVENTORY> 1,240,876 1,204,321
<CURRENT-ASSETS> 3,996,338 4,315,642
<PP&E> 8,333,165 8,318,264
<DEPRECIATION> 1,428,570 1,231,776
<TOTAL-ASSETS> 17,337,398 20,908,198
<CURRENT-LIABILITIES> 23,349,959 22,839,582
<BONDS> 0 0
0 0
0 0
<COMMON> 117,018 117,018
<OTHER-SE> (11,733,721) (7,449,455)
<TOTAL-LIABILITY-AND-EQUITY> 17,337,398 20,908,198
<SALES> 5,179,117 5,714,703
<TOTAL-REVENUES> 5,179,117 5,714,703
<CGS> 3,460,355 4,767,167
<TOTAL-COSTS> 5,348,317 7,252,824
<OTHER-EXPENSES> 6,620 3,785
<LOSS-PROVISION> 2,125,443 0
<INTEREST-EXPENSE> 704,539 1,533,469
<INCOME-PRETAX> (3,005,802) (3,075,375)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (3,005,802) (3,075,375)
<DISCONTINUED> (1,349,741) (528,327)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,355,542) (3,603,702)
<EPS-PRIMARY> (.29) (.49)
<EPS-DILUTED> (.38) (.49)
</TABLE>
