<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 June 30, 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 August 6, 1998
----- -----------------------------
Common Stock, $.01 Par Value 15,361,553
<PAGE>
PART I
FINANCIAL
INFORMATION
2
<PAGE>
SILVERADO FOODS, INC. AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1998 1997
------ ---- ----
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 72,160 $ 56,359
Accounts receivable, net -- 2,689,893
Inventories, net -- 1,204,321
Prepaid expenses and other -- 365,069
------------ ------------
Total current assets 72,160 4,315,642
------------ ------------
NET ASSETS HELD FOR SALE (Notes 2 and 3) 3,858,399 2,835,459
NOTES RECEIVABLE (Note 5) 3,089,338 1,178,582
PROPERTY, PLANT AND EQUIPMENT, net (Note 2) 13,703 7,086,488
GOODWILL AND OTHER INTANGIBLES, net (Note 2) 170,387 5,492,027
============ ============
Total assets $ 7,203,987 $ 20,908,198
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 18,677,726 $ 14,257,040
Short-term notes payable 475,000 500,000
Trade accounts payable 765,763 4,516,522
Accrued liabilities 2,053,886 3,291,737
Other liabilities -- 274,283
------------ ------------
Total current liabilities 21,972,375 22,839,582
------------ ------------
LONG-TERM DEBT, less current maturities -- 5,360,086
OTHER -- 40,967
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' DEFICIT
Common stock, $.01 par value, 20,000,000 shares authorized 146,071 117,018
14,607,125 issued and 14,580,130 outstanding
Warrants 51,159 46,549
Additional paid-in-capital 28,881,074 28,843,461
Accumulated deficit (43,782,040) (36,274,813)
------------ ------------
(14,703,736) (7,267,785)
Less: Treasury stock (64,652) (64,652)
------------ ------------
Total shareholders' deficit (14,768,388) (7,332,437)
============ ============
Total liabilities and shareholders' deficit $ 7,203,987 $ 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 JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
------------------------------------ ----------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING EXPENSES:
General and administrative $ 135,183 $ 176,148 $ 288,815 $ 320,174
------------- ------------- ------------- -------------
135,183 176,148 288,815 320,174
------------- ------------- ------------- -------------
OPERATING LOSS (135,183) (176,148) (288,815) (320,174)
------------- ------------- ------------- -------------
LOSS FROM CONTINUING OPERATIONS (135,183) (176,148) (288,815) (320,174)
DISCONTINUED OPERATIONS
Operating Loss (1,869,697) (3,027,152) (4,840,595) (6,486,830)
Loss on Disposal (1,146,804) (1,379,978) (2,377,817) (1,379,976)
------------- ------------- ------------- -------------
LOSS FROM DISCONTINUED OPERATIONS (3,016,501) (4,407,130) (7,218,412) (7,866,806)
------------- ------------- ------------- -------------
NET LOSS $ (3,151,684) $ (4,583,278) $ (7,507,227) $ (8,186,980)
============= ============= ============= =============
BASIC LOSS PER SHARE FROM (NOTE 4):
CONTINUING OPERATIONS $ (0.01) $ (0.02) $ (0.02) $ (0.04)
DISCONTINUED OPERATIONS (0.10) (0.37) (0.29) (0.84)
LOSS ON DISPOSAL (0.06) (0.17) (0.14) (0.18)
============= ============= ============= =============
NET LOSS PER SHARE $ (0.17) $ (0.56) $ (0.45) $ (1.06)
============= ============= ============= =============
DILUTED LOSS PER SHARE FROM:
CONTINUING OPERATIONS $ (0.01) $ (0.02) $ (0.02) $ (0.04)
OPERATING LOSS FROM DISCONTINUED OPERATIONS (0.13) (0.38) (0.38) (0.85)
LOSS ON DISPOSAL (0.08) (0.17) (0.19) (0.18)
============= ============= ============= =============
NET LOSS PER SHARE $ (0.22) $ (0.57) $ (0.59) $ (1.07)
============= ============= ============= =============
</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
Exchange of Note Receivable for -- -- -- -- -- (200,000) -- (200,000)
reduction of stock guarantee
Issuance of common stock 274,674 2,746 -- -- -- 197,254 -- 200,000
in connection with debenture --
conversion --
Issuance of warrants -- -- -- -- 4,610 -- -- 4,610
Issuance of common stock in --
in connection with settlement --
of employment agreement 840,000 8,400 -- -- -- (8,400) -- --
Contribution of capital 1,790,694 17,907 -- -- -- (17,907) -- --
Net loss -- -- -- -- -- -- (7,507,227) (7,507,227)
---------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1998 14,607,125 $146,071 (26,995) $(64,652) $51,159 $ 28,881,074 $(43,782,040) $(14,768,388)
=============================================================================================
</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>
SIX MONTHS ENDED JUNE 30,
-----------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (7,507,227) $ (8,186,980)
------------ ------------
Adjustments to reconcile net loss to cash used in operating activities--
Depreciation and amortization 706,403 1,127,779
Accretion of debenture discount 66,666 1,150,000
Increase in allowance for doubtful accounts -- 1,000,000
Loss on sale of assets 2,377,817 1,308,046
Loss on adjustment to carrying value 2,125,443 --
Change in assets and liabilities, net of effect of acquisitions
Decrease in accounts receivable 1,006,416 1,428,505
Decrease in inventory 289,552 1,092,848
(Increase) Decrease in prepaid expenses and other (83,879) (185,288)
Increase in assets held for disposal (2,118,697) (388,573)
Increase (Decrease) in payables and accrued liabilities 2,240,369 (2,519,433)
Decrease in intangibles and other 661,836 231,136
Decrease in property, plant & equipment 253,910 --
------------ ------------
Total adjustments 7,525,836 4,245,020
------------ ------------
Cash provided by (used in) operating activities 18,609 (3,941,960)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of assets 1,052,153 --
Capital expenditures (50,391) (938,525)
------------ ------------
Cash provided by (used in) investing activities 1,001,762 (938,525)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from long-term debt 6,059,540 10,620,911
Payments on notes payable and long-term debt (7,064,110) (5,884,449)
------------ ------------
Cash provided by (used in) financing activities (1,004,570) 4,736,462
------------ ------------
NET INCREASE (DECREASE) IN CASH 15,801 (144,023)
CASH, beginning of period 56,359 164,118
------------ ------------
CASH, end of period $ 72,160 $ 20,095
============ ============
Non-cash Financing Activities:
Issuance of stock for debenture conversion $ 200,000 $ 1,461,504
Addition to paid-in-capital for debenture discount accretion 66,666 1,150,000
Receipt of note receivable for sale of assets 2,458,750 1,012,383
Contribution of capital -- 2,595,601
Exchange of note receivable for reduction of stock guarantee 200,000 --
SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash paid for-
Interest $ 604,783 $ 253,718
Taxes $ -- $ --
</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. DISCONTINUED OPERATIONS:
During the second quarter of 1998, the Company entered into a plan of disposal
for its specialty baked goods division. This disposition is in addition to the
snack tray business, the catalog food division, and the direct store delivery
business, which were discontinued in late 1996 and 1997. The results of each of
these operations are included in the discontinued operations section of the
income statement, and their assets have been classified as assets held for sale.
Operating expenses include selling, general and administrative, and interest
expense related to these operations. The following tables summarize the
operations and the components of net assets for the periods indicated below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
Sales: 1998 1997 1998 1997
-------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Specialty Baked Goods $ 5,687,779 $ 5,874,795 $10,866,895 $11,909,068
Snack Tray 4,206,643 8,011,803 9,198,813 15,694,694
------------------------------- -------------------------------
9,894,422 13,886,598 20,065,708 27,603,762
------------------------------- -------------------------------
Cost of Sales:
Specialty Baked Goods 4,201,695 4,792,878 7,662,051 9,876,672
Snack Tray 2,055,008 4,418,178 4,636,817 8,794,222
------------------------------- -------------------------------
6,256,703 9,211,056 12,298,868 18,670,894
------------------------------- -------------------------------
Operating Expenses:
Specialty Baked Goods 3,355,781 5,250,153 8,045,439 9,289,673
Snack Tray 3,298,439 3,832,519 6,939,813 7,510,001
------------------------------- -------------------------------
6,654,220 9,082,672 14,985,252 16,799,674
------------------------------- -------------------------------
Loss from Discontinued Operations:
Specialty Baked Goods (1,869,697) (4,168,236) (4,840,595) (7,257,277)
Snack Tray (1,146,804) (238,894) (2,377,817) (609,529)
------------------------------- -------------------------------
Total $(3,016,501) $(4,407,130) $(7,218,412) $(7,866,806)
=============================== ===============================
</TABLE>
7
<PAGE>
Net assets held for sale at June 30, 1998 include the following:
<TABLE>
<CAPTION>
SNACK TRAY AND SPECIALTY TOTAL
DIRECT STORE DELIVERY BAKED GOODS -----
--------------------- -----------
<S> <C> <C> <C>
Accounts Receivable $ 1,256,230 $ 1,683,477 $ 2,939,707
Inventory 1,540,055 914,769 2,454,824
Other Assets 188,349 448,948 637,297
PP&E 946,952 4,153,787 5,100,739
Goodwill 2,571,710 2,362,211 4,933,921
Accounts Payable (1,608,961) (5,630,204) (7,239,165)
Accrued Liabilities (2,661,525) (1,598,775) (4,260,300)
Other Non-Current Liabilities (708,624) - (708,624)
----------- ----------- -----------
Net assets held $ 1,524,186 $ 2,334,213 $ 3,858,399
for sale =========== =========== ===========
</TABLE>
3. DETAILS TO CONSOLIDATED BALANCE SHEETS:
The inventories related to the Company's discontinued operations are detailed in
Note 2 as a component of net assets held for sale. 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:
DECEMBER 31,
1997
----------
Raw Materials $ 908,105
Finished Goods 370,192
----------
1,278,297
Less: Allowance for excess and
obsolete inventory (73,976)
----------
$1,204,321
==========
4. LOSS PER SHARE:
For the three months ended June 30, 1998 and June 30, 1997, the basic loss per
share calculation includes the weighted average number of shares outstanding for
the period which were 18,319,415 and 8,106,977, respectively. For the six
months ended June 30, 1998 and June 30, 1997, the basic loss per share
calculation includes the weighted average number of shares outstanding for the
period which were 16,678,842 and 7,719,210, respectively.
For the three months ended June 30, 1998 and 1997, the diluted loss per share
calculation includes the weighted average number of shares outstanding for the
period which were 13,996,224 and 7,997,935 shares respectively. For the six
months periods ended June 30, 1998
8
<PAGE>
and 1997, the diluted loss per share calculation includes the weighted average
number of share outstanding for the period which were 12,848,991 and 7,664,689,
shares respectively. Included in the basic loss per share are 4,323,191 (on a
weighted average basis) contingent shares related to fulfillment of a stock
price guarantee for the three month period and 3,829,852 shares included for the
six month period.
5. NOTES RECEIVABLE:
On June 12, 1998, the Company disposed of its bagel bar business, the related
manufacturing facilities and equipment, and certain inventories. The business
was sold to Gourmet Specialty Bakers, Inc. for total consideration of
$3,750,000, including a note of approximately $2,500,000, the assumption of
certain liabilities of approximately $250,000, and the potential of an
additional earn-out of approximately $1,250,000 if certain sales and
distribution targets are met. The note receivable is due and payable on November
30, 1998, and in lieu of interest on such note, a royalty of 2.5% of net
existing sales will be payable to the Company. The note receivable has been
discounted by approximately $41,000 to reflect the difference between interest
imputed at 10% and the expected royalty payments to be received.
6. 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 $43,782,000 and a deficit in stockholders' equity of approximately
$14,768,000. These conditions have combined to create a working capital deficit
of approximately $21,900,000 at June 30, 1998.
As discussed in Note 7, the Company recently announced that it had entered into
a letter of intent regarding a transaction with Swander Pace Capital LLC whereby
Swander Pace Capital LLC will acquire 90% of the Company's Nonni's biscotti
business. The Company also has plans to sell all remaining assets. Also, as
discussed in Note 5 the Company disposed of its bagel bar business on June 12,
1998.
On April 10, 1998, the Company factored certain accounts receivable and used a
portion of those proceeds to reduce the amounts owed under the Company's
$7,000,000 revolving line of credit to $6,000,000. Simultaneously, 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 agreed to repay the $6,000,000
assumed by the Company's Chairman and his spouse by delivering a note payable
due in August 1998; however, if excess cash is not available to repay the note,
the due date will be extended.
The Company has also entered into short-term financing transactions with Accord
Capital Corporation (Accord) in which the Company pledged certain inventories as
collateral. These transactions are typically for periods of thirty days at high
short-term interest rates. As of June 30, 1998, the Company owed $1,578,000 to
Accord.
9
<PAGE>
7. SUBSEQUENT EVENT:
On July 7, 1998 the Company announced that it had entered into a letter of
intent regarding a transaction whereby Swander Pace Capital, LLC, will acquire
90% of the Company's Nonni's 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 facility, the distribution
rights, and other brands used for the biscotti products. The expected value to
be received by the Company in the proposed transaction is approximately
$32,000,000, including approximately $25,700,000 in cash at closing (subject to
adjustments), $1,300,000 in a minority investment in the common equity of the
Nonni's entity that the Company would retain, and $5,000,000 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. Also on July 7, 1998, the
Company terminated negotiations with L. F. Capital LLC, regarding a sale of the
Nonni's biscotti business, as the firms were unable to negotiate a definitive
contract.
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. Once all of the current businesses are divested,
management will evaluate other alternatives, which include, but are not limited
to, acquisitions or mergers. Liquidation of the Company's remaining assets to
shareholders will only be considered by management if there are no other
alternatives which equally maximize shareholder value.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
---------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
The following discussion and analysis should be read in conjunction with the
Company's Consolidated Financial Statements and notes thereto. As discussed in
the accompanying Consolidated Financial Statements, the Company has discontinued
all of its operating businesses, including its specialty baked goods segment,
its snack tray segment and its direct store delivery division. The following
table presents certain selected financial data for the Company for the periods
indicated:
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------- ------ -----
1998 1997 1998 1997
---- ---- ---- ----
DISCONTINUED OPERATIONS
- -----------------------
Net sales 100% 100% 100% 100%
Gross profit 37% 34% 39% 32%
Operating Expenses 67% 65% 75% 61%
Loss from discontinued operations (30%) (32%) (36%) (29%)
PERIOD TO PERIOD COMPARISONS FOR THE THREE MONTHS ENDED JUNE 30, 1998 COMPARED
TO THE THREE MONTHS ENDED JUNE 30, 1997
RESULTS OF CONTINUING OPERATIONS
The continuing operations information includes only corporate operating expenses
for general and administrative purposes. The remaining operations are all shown
as discontinued operations. No income tax benefit has been recognized in
connection with these discontinued operations due to the Company's net operating
loss carry forward position.
General and Administrative. General and administrative expenses decreased from
$176,000 to $135,000, a decrease of $41,000. The majority of this decrease was
due to lower investor relations costs in 1998.
RESULTS OF DISCONTINUED OPERATIONS
Net Sales. Total net sales for the three month period ended June 30, 1998
decreased 29% to $9,894,000 versus $13,887,000 for the same period of 1997.
Sales in the specialty baked goods segment decreased to $5,688,000 during the
second quarter of 1998 versus $5,875,000 for the same period of 1997. Biscotti
sales increased $1,502,000 or 20% but were offset by sales decreases in the
bagel bar product line of approximately $1,338,000, and in the snack product
line of $300,000, resulting in an overall decrease of 3%. Due to divestiture of
certain snack tray markets, the snack tray and direct store delivery segment's
net sales decreased from $8,012,000 to $4,207,000 and accounted for 43% of total
sales for the quarter ending June 30, 1998 compared to 58% for the same period
of 1997.
11
<PAGE>
Gross Profit. Gross profit for the three months ended June 30, 1998 was
$3,637,000, a 23% decrease over the comparable period in 1997 of $4,676,000.
Gross profit as a percentage of net sales increased from 34% to 37%. Total
gross profit in the snack tray segment was $2,152,000, a decrease of 40% over
the prior year quarter and decreased as a percentage of net sales from 55% to
51%. This decrease in gross margin was a result of higher purchased product
cost for the snack tray segment when compared to the same period of 1997.
In the specialty baked goods segment, gross profit increased $404,000, from
$1,082,000 to $1,486,000. Driving this increase in gross profit was an increase
in the gross profit of the biscotti product line of $576,000, offset by
decreases in the bagel bar and Maxi-Crisp product lines. The increase in the
biscotti product line gross profit was due to improved pricing, implementation
of cost-cutting measures and increased sales volumes.
Operating Expenses. Operating expenses decreased from $9,083,000 to $6,654,000,
a decrease of $2,429,000 and increased as a percentage of net sales from 65% to
67%. Operating expenses for the specialty baked goods division decreased 36%
from $5,250,000 to $3,356,000. The majority of this decrease was due to (a) a
reserve provision of $1,000,000 related to a note receivable that occurred in
the second quarter of 1997, (b) decreased selling and marketing expenses for
demonstrations of the Company's bagel bar product, and (c) decreased salary and
benefit costs due to plant consolidation. These lower costs were offset by
higher financing costs during the period. Operating expenses for the snack tray
and direct store delivery businesses decreased 14% from $3,833,000 to $3,298,000
which was directly related to the reduction in the number of market centers,
offset by the additional provision for loss on disposal of $1,147,000. The loss
on disposal for the three month period ended June 30, 1998 represents an
additional loss related to the snack tray segment due to lower than expected
sales proceeds and higher than expected interim operating losses. The loss on
disposal for the three month period ended June 30, 1997 primarily represents the
loss recorded on the sale of the Company's catalog division.
Loss from Discontinued Operations. The Company's net loss decreased from
$4,407,000 to $3,017,000, a decrease of $1,390,000 over the comparable period
for 1997. This decrease is due to lower operating expenses as discussed above.
12
<PAGE>
PERIOD TO PERIOD COMPARISONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO
THE SIX MONTHS ENDED JUNE 30, 1997
Results of Continuing Operations
- --------------------------------
General and Administrative. General and administrative expenses decreased
$32,000 for the period ended June 30, 1998 compared to the period ended June
30, 1997. The decrease was due to reduced investor relations costs in 1998.
RESULTS OF DISCONTINUED OPERATIONS
- ----------------------------------
Net Sales. Total net sales decreased 27% from $27,604,000 to $20,066,000. Sales
in the snack tray and direct store delivery segment decreased by $6,496,000 to
$9,199,000 or 41% while sales in the specialty baked goods segment decreased by
$1,402,000 or 9%. The reduction in the snack tray sales was the result of the
Company's divestiture plan for its snack tray market centers. At June 30, 1998,
only four of the original 23 market centers remain to be sold. The decrease in
the specialty baked goods segment was due to lower sales from the Company's
bagel bar products offset by higher sales in the biscotti product line of
$2,845,000.
Gross Profit. Gross profit decreased from $8,933,000 to $7,767,000, a decrease
of 13%. Gross profit as a percentage of net sales increased from 32% to 39%.
Gross profit for specialty baked goods increased as a percentage of sales from
17% to 29%. Leading the increase in gross profit was higher margins in the
biscotti product line which increased from 23% to 31% due to a number of cost
saving initiatives implemented by management, improved product pricing, exiting
unprofitable markets and improved manufacturing efficiencies. The gross profit
percentage for the snack tray and direct store delivery segment increased as a
percentage of sales from 44% to 49%, which was due to the sale of lower
performing market centers and a higher percentage of commission sales in the
direct store delivery business.
Operating Expenses. Operating expenses decreased from $16,800,000 to
$14,985,000, a decrease of 11% and increased as a percentage of net sales from
61% to 75%. Operating expenses for the specialty baked goods segment decreased
13% from $9,290,000 to $8,045,000 due to the 1997 reserve provided on the Gift
and Gourmet business, the reduction in selling and marketing expenses for
demonstrations of the Company's bagel bar products, decreased salary and benefit
costs due to plant consolidation, and decreased financing costs. These were
offset by the loss provided on the disposal of the bagel bar business in the
first quarter of 1998. Operating expenses for the snack tray and direct store
delivery business decreased 8% from $7,510,000 to $6,940,000. The reduction in
costs related to sale of the market centers was offset by the provision for loss
on disposal.
Loss from Discontinued Operations. The loss from discontinued operations
decreased 8% to $7,218,000 from $7,867,000 due to the events which were
discussed above.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations was $19,000 for the six months ended June
30, 1998. This compares to $3,942,000 of cash used in operations for the six
months ended June 30, 1997. Net cash provided by investing activities was
$1,002,000 compared to $939,000 used by investing activities for the comparable
period. Net cash used by financing activities during the first six months ended
June 30, 1998 totaled $1,005,000 from net payments 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 delivering 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 August
11, 1998, the Company owes the Chairman and his spouse $12,245,000.
The Company has a $6,000,000 term note with a bank. At June 30, 1998,
$6,000,000 was outstanding and interest is at prime. Interest is payable
monthly and principal payments begin in August 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.
Subsequent to June 30, 1998, this term note was increased to $6,500,000.
Interest and principal payments have been suspended until August, 1998.
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. On May 14, 1998, these debentures were converted into
274,674 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 June 30,
1998 with most of the Company's debt classified as current. However, on July
7,1998, the Company announced that it had entered into a letter of intent
whereby Swander Pace Capital, LLC, will acquire 90% of the Company's Nonni's
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 facility, 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 $25,700,000 in cash
at closing (subject to adjustments), $1,300,000 in a minority investment in the
common equity of the Nonni's entity that the Company would retain, and
$5,000,000 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.
Also on July, 7, 1998, the Company terminated negotiations with L. F. Capital
LLC, regarding a sale of Nonni's, as the firms were unable to negotiate a
definitive contract.
14
<PAGE>
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. This transaction is expected to close during the
fourth 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.
During the second quarter, the Company also disposed of its bagel bar business,
the related manufacturing facility and equipment, and certain inventories. The
business was sold to the Gourmet Specialty Bakers, Inc. for total consideration
of $3,750,000, including a note of approximately $2,500,000, the assumption of
certain liabilities of approximately $250,000, and the potential of an
additional earn-out of approximately $1,250,000 if certain sales and
distribution targets are met. The note receivable is due and payable on November
30, 1998.
The Company has also entered into short-term financing transactions with Accord
Capital Corporation (Accord) pledging certain inventories as collateral. These
transactions are typically for periods of thirty days at high short-term
interest rates. These transactions are guaranteed by the Company's chairman. As
of June 30, 1998, the Company owed $1,578,000 to Accord.
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
financings which may or may not be available or available only at high interest
rates 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 forward-looking statements,
whether as a result of new information, future events or otherwise.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
During the second quarter of 1998, the Company issued a total of
274,674 shares of common stock in connection with the conversion of convertible
debentures previously issued by the Company in transactions effected pursuant to
Regulation S promulgated under the Securities Act of 1933, as amended ( the
"Act"). The recipients of such shares of common stock were accredited investors
( as defined in Regulation D promulgated under the Act). The shares of common
stock issued upon such conversion were exempt from registration under the Act
pursuant to Section 3(a)(9) of the Act. No commission or other remuneration was
paid to a broker or placement agent in connection with such conversion. The
dates of the Company's issuance instructions to its transfer agent and the
conversion price per shares for each of such conversions is as follows:
Date Conversion Price Number of Shares
May 14, 1998 $.73 274,674
Each of the following issuances described below was effected and
relies upon an exemption from registration, under Section 4(2) of the Securities
Act, for transactions by an issuer not involving any public offering, or other
exemption as set forth below. No commission or other remuneration was paid to a
broker or placement agent in connection with such issuance
On April 14, 1998, the Company issued 840,000 shares in connection
with the termination of employment agreements with the previous owners of the
Nonni's biscotti business.
On April 14, 1998, the Company issued 1,790,694 shares to the Chairman
in return for forgiveness of debt.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
16
<PAGE>
(a) Exhibits:
10.1 Promissory Note dated April 10, 1998 in the original
principal amount of $6,000,000 payable to Lawrence Field
10.2 Amended and Restated Agreement dated April 19th by and
between Silverado Foods, Inc. and Accord Capital
Corporation
27.0 Financial Data Schedule
(b) Reports on Form 8-K
Form 8-K filed on June 29, 1998 regarding the sale of the bagel
bar business to Gourmet Specialty Bakers, Inc.
17
<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: August 14, 1998
18
<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.
10.1 Promissory Note dated April 10, 1998 in the original principal amount
of $6,000,000 payable to Lawrence Field.
10.2 Amended and Restated Agreement dated April 19th by and between
Silverado Foods, Inc. and Accord Capital Corporation
27.0 Financial Data Schedule.
<PAGE>
EXHIBIT 10.1
[SILVERADO LETTERHEAD APPEARS HERE]
$6,000,000 PROMISSORY NOTE Tulsa, Oklahoma
April 10, 1998
FOR VALUE RECEIVED, the undersigned, SILVERADO FOODS, INC., promises to pay
to the order of LAWRENCE AND CINDY FIELD, at Tulsa, Oklahoma, the principal sum
of six million and 00/100 Dollars ($6,000,000.00), with interest thereon from
the date hereof until maturity at a rate per annum of Bank One, Oklahoma N.A.
prime plus 1 1/2%. Principal and accrued interest shall be payable monthly
beginning May 10, 1998 with principal due at the earlier of August 31, 1998 or
at the time of the sale of a substantial portion of the assets of Silverado
Foods, Inc.
This promissory note is a result of the note agreement between Lawrence
Field, Cindy Field and Bank One, Oklahoma N.A. and the cancellation of the note
agreement between Bank One, Oklahoma N.A. and Silverado Foods, Inc. in the
amount of $6,000,000.
Silverado Foods, Inc. recognizes that after this note is executed, Lawrence
and Cindy Field will file a security interest in all trade receivables and
inventories of Silverado Foods, Inc.
If all or any portion of the indebtedness hereby evidenced is not paid when
due, dissolution, insolvency, bankruptcy, receivership, or business failure of
maker, endorser and guarantor hereof, the holder may, without notice or demand,
declare this indebtedness to be immediately due and payable.
The undersigned agrees that if, and as often as, this Note is placed in the
hands of an attorney for collection or to defend or enforce any of the holder's
rights hereunder or under any instruments securing payment of this Note, the
undersigned will pay to the holder its reasonable attorney's fees and all court
costs and other expenses incurred in connection therewith.
This Note is to be construed according to the laws of the State of
Oklahoma.
By: /s/ Lawrence Field By: /s/ Dorvin D. Lively
----------------------------- --------------------------------
LAWRENCE FIELD DORVIN D. LIVELY,
Chief Financial Officer
SILVERADO FOODS, INC.
Date: April 10, 1998 Date: April 10, 1998
--------------- ---------------
By: /s/ Cindy Field
-----------------------------
CINDY FIELD
Date: April 10, 1998
---------------
<PAGE>
EXHIBIT 10.2
AMENDED AND RESTATED
--------------------
AGREEMENT FOR PURCHASE AND SALE OF ACCOUNTS
-------------------------------------------
This Amended and Restated Agreement for Purchase and Sale of Accounts is
entered into effect on the 9th day of April, 1998, by and between SILVERADO
FOODS, INC., NONNI'S and THE BAGEL PLACE DIVISIONS OF SILVERADO FOODS, INC.,
all Oklahoma corporations located at 6846 S. Canton Suite 110, Tulsa, Oklahoma
74136; 3920 East Pine Street, Tulsa, Oklahoma 74115, and 1701 East Edinger,
Suite F5, Santa Ana, California 92705 ("Seller") and ACCORD CAPITAL
CORPORATION, an Oklahoma corporation located at 2504-A East 21st Street, Tulsa,
Oklahoma 74114 ("Accord"). Seller and Accord hereby agree as follows:
1. Definitions.
(a) "Accounts" shall mean the accounts described on Schedule A
attached hereto and made a part hereof as amended or supplemented from time
to time.
(b) "Account Debtors" shall mean the customers of Seller referenced
on Schedule A attached hereto and made a part hereof as amended or
supplemented from time to time.
(c) "Initial Payment" shall mean a sum equal to eighty percent (80%)
of the face amount of each Account described on Schedule A attached hereto
and made a part hereof as amended or supplemented from time to time.
(d) "Obligations" shall mean all indebtedness and obligations of
Seller owed to Accord pursuant to this Agreement or otherwise, plus any
accrued and unpaid interest and all expenses including (without limitation)
all attorneys fees and expenses paid or incurred by Accord in attempting to
collect Obligations or any part thereof (whether incurred through the
necessity of litigation or otherwise) and in all other ways enforcing the
terms of this Agreement.
(e) "Reimbursements" shall mean those expenses to be reimbursed by
Seller to Accord pursuant to paragraph 8 hereof.
(f) "Reserve" shall mean a sum equal to twenty percent (20%) of the
face amount of each Account described on Schedule A attached hereto and
made a part hereof as amended or supplemented from time to time.
2. Amount Subject to Factoring. Subject to the terms and conditions
stated herein, Accord commits to purchase Accounts not to exceed the
stated
<PAGE>
amount of Three Million Dollars ($3,000,000.00) of the Accounts
purchased by Accord. (the "Maximum Amount").
3. Fees Due From Seller. Factor Commitment Fee. Seller agrees to pay
Accord at the time of closing from the Initial Payment an amount equal
to one percent (1%) of the Maximum Amount as a loan commitment fee for
the establishment of the Agreement, which Seller agrees is a
reasonable amount relating to the establishment of such factoring
relationship.
4. Purchase and Sale of Accounts.
(a) Seller hereby sells, assigns, transfers, conveys and delivers to
Accord all of Seller's right, title and interest in and to the Accounts,
the invoices evidencing the Accounts and all other documents related to or
associated with the Accounts. The sale of the Accounts is unconditional and
without reservation of any kind.
(b) Accord shall deliver the Initial Payment to Seller at the time
each of the Accounts is sold, assigned, transferred and delivered to Accord
less a fee owed to Accord equal to two and one quarter percent (2.25%) of
the face amount of each Accounts. Upon collection of each of the Accounts
from the Account Debtors, Accord shall deliver a check to Seller (drawn
against the Reserve) for the aggregate amount collected less (i) the
Initial Payment, (ii) a fee owed Accord equal to One percent (1%) of the
face amount of the collected Account(s) for each additional thirty (30) day
period (or part thereof) from the date payment is received on each of the
collected Accounts. (iii) all Reimbursements, and (iv) all other amounts
due Accord hereunder. Checks shall be delivered to Seller pursuant to the
following schedule:
Account Collection Date Payment Date to Seller
----------------------- ----------------------
On or after the 1st day and before 25th day of the
The 15th day of a month same month
On or after the 15th day and on or 10th day of the
Before the last day of a month succeeding month
The Reserve may be applied by Accord prior to any distribution to Seller
first (i) compensating Accord for any breach by Seller of any provisions of
this Agreement and (ii) compensating Accord for any sums owing to Accord
pursuant to this Agreement including (without limitation) all Obligations.
Seller understands that (i) the obligations of Accord under this
subparagraph 2(b) are unsecured general obligations of Accord, (ii) Seller
has no rights in or claim to amounts collected on any of the Accounts, and
(iii) the Reserve is a payment mechanism and does not
2
<PAGE>
constitute property of Seller or funds held in trust by Accord for the
benefit of Seller.
Accord shall deduct from the first Initial Payment to be delivered to
Seller by Accord the actual costs and expenses of Accord's legal counsel
incurred in connection with the preparation of documents, out of pocket
expenses and negotiating the transactions contemplated herein in an amount
of $4,750.
5. Seller's Representations, Warranties and Covenants. Seller represents,
warrants and covenants to Accord that:
(a) Seller is the sole owner of the Accounts. The Accounts are free
and clear of all liens, claims and encumbrances and have not been assigned
or encumbered in any manner. Seller has the full power and authority to
sell each of the Accounts and has duly authorized their sale to Accord
pursuant to this Agreement.
(b) Each Account is for the amount stated on Schedule A and there are
no setoffs, deductions, disputes, contingencies or counterclaims against
Seller or any of the Accounts. In the event of a misrepresentation by
Seller (whether intentionally or otherwise) as to the amount of an Account
or a reduction by an Account Debtor in the amount paid or owing on an
Account for any reason, Accord shall provide notice to Seller and may
reduce by the same amount the Reserve and any other payments received on or
for the account of Seller hereunder. In addition, Accord may demand
reimbursement directly from Seller for the amount of any deficiency and
Seller shall immediately deliver such amount to Accord. Each Account is
based upon an actual sale and delivery of merchandise or services and the
Account Debtor is liable for the payment of the amount stated on the
Account according to its terms. The original invoice evidencing the Account
bears notice of the assignment of the Account to Accord. Seller shall
indemnify and protect Accord against liability, loss or expense caused by
or arising out of direct rejection of goods or alleged claims, defenses, or
offsets of every kind.
(c) Each Account is current and presently due and owing to Seller.
Payment on each Account is not contingent upon fulfillment of any
obligation or condition at any time.
(d) Accord shall be the sole owner and holder of the Accounts,
together with any proceeds, contract rights and/or claims relating to the
Accounts, all of which are to be deemed a part of the Accounts. In the
event Seller receives payment for all or any portion of any of the
Accounts, Seller shall immediately notify Accord and shall hold all checks
3
<PAGE>
and other instruments received by Seller in trust for Accord and shall
deliver to Accord such checks and other instruments (or, at the direction
of Accord, the proceeds thereof) without delay.
(e) In no event shall Accord be obligated to pursue collection of the
Accounts by litigation or otherwise.
(f) Accord and its directors, officers and agents shall have the
right to sign and endorse on behalf of Seller all checks, drafts and other
forms of payment received by Accord in connection with the payment of any
Account. Seller appoints Accord or any other person, whom Accord may from
time to time designate, as Seller's attorney-in-fact with power to:
(i) endorse Seller's name on any checks, drafts or other
forms of payment or security that may come into Accord's possession;
(ii) sign Seller's name on notices of assignment, financing
statements, verifications of Accounts and notices to Account Debtors;
(iii) receive, open and dispose of all mail addressed to
Seller and received by Accord;
(iv) send requests for verification of Accounts to Account
Debtors; and
(v) do all things necessary to carry out the terms of this
Agreement.
This power of attorney granted Accord, being coupled with an interest, is
irrevocable as long as any Obligation remains outstanding. Accord shall
not be liable to Seller for any acts of commission or omission nor for any
error in judgment or mistake of fact or law.
(g) Should Seller at any time breach any provision of any agreement
between Seller and Accord including (without limitation) this Agreement,
Accord shall have the right to notify Seller in writing that Accord is
requiring Seller to repurchase immediately all unpaid Accounts under this
and all other agreements between Seller and Accord. Seller shall repurchase
all unpaid Accounts immediately upon receipt of such written notice if
Seller has not cured such breach to the satisfaction of Accord. In such
event, Seller agrees that, in addition to paying Accord all sums otherwise
due Accord from Seller, Seller shall be responsible for paying Accord an
amount equal to (i) the Initial Payment advanced by Accord against all such
unpaid Accounts, (ii) the fee which is earned by
4
<PAGE>
Accord to the date payment is received by Accord, and (iii) any
Reimbursements.
(h) Accord reserves the right to return to Seller all Accounts that
are not paid in full within sixty (60) days after the date of such Account
or upon notice from an Account Debtor that such Account Debtor will not be
paying its respective Account(s) in full. Accord may reduce the amount of
the Reserve by the amount of the Account(s) returned to Seller or if the
Reserve is insufficient to pay Accord in full, Seller immediately shall pay
Accord the amount due Accord upon return of the Account(s) and all other
amounts due under this Agreement. No Account shall be deemed returned to
Seller until such time as Accord shall have received all amounts due to
Accord.
(i) In addition to the rights granted Accord under the Uniform
Commercial Code, Accord shall have all of the rights of an unpaid seller,
including the rights of replevin, reclamation, and stoppage in transit, and
any merchandise so recovered will be considered, as between Accord and
Seller, as returned merchandise.
(j) All of Seller's books, accounts, correspondence, records and
papers pertaining to the Accounts shall be available for Accord's
inspection during regular business hours.
(k) From the date of this agreement and until the date one hundred
fifty (150) days form the date of this Agreement, Seller shall offer to
sell to Accord all accounts receivable of Seller on the terms and
conditions set forth herein. Accord, in its sole and absolute discretion,
shall then have the right and option to review and acquire all or any of
such accounts receivable offered to Accord within five (5) business days
after such offer is made to Accord. Accord shall be under no obligation to
purchase any accounts receivable of Seller. Accord shall process and mail
all invoices of Seller.
(l) Seller acknowledges that Accord may grant a security interest in
the Accounts, including any proceeds, contract rights and/or claims
relating to the Accounts, to secure obligations owing by Accord to one or
more secured parties. Seller hereby joins in the granting of a security
interest in the Accounts in favor of such secured parties and agrees that
the rights of such secured parties with respect to the Accounts and all
amounts collected thereon will be prior and paramount to any rights or
claims of Seller with respect to the Accounts or any amounts collected
thereon.
6. Security. In order to secure Seller's Obligations, Seller hereby
grants to Accord a security interest in and lien upon all of Seller's right,
title and interest in and to
5
<PAGE>
all of Seller's existing and future accounts, contract rights, receivables,
accounts receivable, claims, general intangibles, equipment, inventory and all
proceeds, substitutions, renewals and products thereof. Seller agrees to comply
with all appropriate laws in order to perfect Accord's security interest in and
to such collateral and Seller shall execute and deliver from time to time at the
request of Accord, any financing statement(s) or additional documents or
instruments, including a security agreement separate from this Agreement.
7. Governing Law/Forum Selection. This Agreement is made and entered
into in Tulsa, Oklahoma, and shall be governed by the laws of the State of
Oklahoma. Seller submits to personal jurisdiction and venue in all state and
federal courts situated in Tulsa, Oklahoma. Seller waives all objections to in
personam jurisdiction, venue and convenience of the forum of such courts with
respect to any suit, proceeding or action. SELLER FULLY, VOLUNTARILY AND
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY REGARDLESS OF THE PARTICULAR COURT
OR FORUM WITH RESPECT TO ANY CLAIM, ACTION, COUNTERCLAIM OR DEFENSE WHATSOEVER
OF ACCORD OR SELLER, WHETHER OR NOT SUCH CLAIM, ACTION, COUNTERCLAIM OR DEFENSE
RELATES OR PERTAINS TO THIS AGREEMENT.
8. Collection and Attorney's Fees. Accord shall have the full power and
authority to collect each Account, through legal action or otherwise, and may,
in its sole discretion, settle, compromise, or assign (in whole or in part) any
of the Accounts, or otherwise exercise any other right now existing or hereafter
arising with respect to any of the Accounts, if such action will facilitate
collection. If Accord is required to enforce its rights hereunder against Seller
or a guarantor of the Obligations of Seller, by virtue of a breach by Seller of
the provisions of this Agreement, then in addition to any other obligations
hereunder, Seller and each guarantor shall jointly and severally be liable for
the full amount of the attorney's fees incurred in collection, together with
interest on the amount of the Accounts from the date hereof to the date of
satisfaction at the maximum rate permitted by law.
9. Complete Agreement. This Agreement and the documents executed in
connection herewith set forth the complete and entire understanding between
Seller and Accord and may be modified only by a written instrument signed by the
party to be bound thereby. Every provision of this Agreement is intended to be
severable, and if any term or provision hereof shall be invalid, illegal or
unenforceable for any reason, the validity, legality and enforceability of the
remaining provisions shall not be affected or impaired thereby, and any
invalidity, illegality or unenforceability in any jurisdiction shall not affect
the validity, legality or enforceability of any such term or provision in any
other jurisdiction.
10. Reimbursements. Seller agrees to reimburse Accord for the following
expenses:
6
<PAGE>
(a) credit research, analysis, credit report preparation and review
of trade credit information at $22.50 for each report;
(b) postage, long distance telephone, facsimile and duplication at
Accord's cost;
(c) processing fee of $1.00 for each invoice;
(d) U.C.C. search and filing fees; and
(e) $2,500.00 Quarterly Monitoring Fee.
(f) wire transfer of immediately available funds to Seller at $15.00
per transfer.
11. The rights and obligations of Accord may be assigned by Accord and
Seller shall, within five (5) days after written request, execute and deliver
any and all documents requested by Accord to evidence such assignment and to
affirm Seller's Obligations to such assignee.
The undersigned have entered into this Amended and Restated Agreement for
Purchase and Sale of Accounts as of the day and year first above written.
ACCORD CAPITAL CORPORATION SILVERADO FOODS, INC.,
2504-A East 21st Street NONNI'S AND THE BAGEL PLACE
Tulsa, Oklahoma 74114 DIVISIONS OF SILVERADO FOODS, INC.
6846 S. Canton Suite 110
Tulsa, Oklahoma 74136
By /s/ Kevin M. Webb By /s/ Lawrence Field
--------------------------------- ---------------------------------
Kevin M. Webb, President Lawrence Field, Chairman of the
Board
7
<PAGE>
EXHIBIT A
---------
Accounts to be added by supplement approved by Seller and Accord.
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> 72,160 56,359
<SECURITIES> 0 0
<RECEIVABLES> 0 2,689,893
<ALLOWANCES> 0 0
<INVENTORY> 0 1,204,321
<CURRENT-ASSETS> 0 0
<PP&E> 72,160 4,315,642
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 7,203,987 20,908,198
<CURRENT-LIABILITIES> 21,972,375 22,839,582
<BONDS> 0 0
0 0
0 0
<COMMON> 146,071 117,018
<OTHER-SE> (14,914,459) (7,449,455)
<TOTAL-LIABILITY-AND-EQUITY> 7,203,987 20,908,198
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 135,183 176,148
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (135,183) (176,148)
<DISCONTINUED> (3,016,501) (4,407,130)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,151,684) (4,583,278)
<EPS-PRIMARY> (.17) (.56)
<EPS-DILUTED> (.22) (.57)
</TABLE>
