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 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 33-43621
INTERNATIONAL FOOD AND BEVERAGE, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0307734
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
30152 Aventura, Rancho Santa Margarita, California 92688
(Address of principal executive offices) (Zip Code)
(714) 858-8800
(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.
Yes X No ____
The number of shares of Common Stock outstanding as of
March 31, 1996 was: 154,033,569
<PAGE>
INTERNATIONAL FOOD AND BEVERAGE, INC.
FINANCIAL STATEMENTS AND OTHER INFORMATION
INDEX
PAGE NUMBER
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Operations
for the three months and nine months ended
March 30, 1996 and April 1, 1995 1
Balance Sheets as of March 30, 1996
and July 1, 1995 2
Statements of Cash Flows for the nine months
ended March 30, 1996 and April 1, 1995 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 5
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 6
SIGNATURES 6
<PAGE>
<TABLE>
INTERNATIONAL FOOD AND BEVERAGE, INC.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
STATEMENTS OF OPERATIONS
<CAPTION>
Nine Months Six Months
Three Months Ended Ended Ended
March 30, April 1, March 30, December 31,
1996 1995 1996 1994
----------- ----------- ----------- ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(Predecessor-Note 2)
<S> <C> <C> <C> <C>
REVENUES $ 1,375,000 $ 1,712,000 $ 4,384,000 $ 3,580,000
COST OF SALES 1,179,000 1,325,000 3,623,000 3,279,000
----------- ------------ ------------ ------------
GROSS PROFIT 196,000 387,000 761,000 301,000
OPERATING EXPENSES:
Selling and distribution 214,000 417,000 720,000 1,412,000
General and administrative 120,000 182,000 396,000 361,000
Interest expense 14,000 0 26,000 111,000
----------- ------------ ------------ ------------
348,000 599,000 1,142,000 1,884,000
----------- ------------ ------------ ------------
NET LOSS $ (152,000) $ (212,000) $ (381,000) $ (1,583,000)
=========== ============ ============ ============
NET LOSS PER COMMON SHARE $ (.00) $ (.00) $ (.00) $ (.01)
=========== ============= ============ =============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 154,033,569 153,923,569 154,027,854 153,923,569
=========== ============ ============ ============
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL FOOD AND BEVERAGE, INC.
BALANCE SHEETS
<CAPTION>
March 30, July 1,
1996 1995
----------- -------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 35,000 $ 192,000
Accounts receivable 258,000 186,000
Inventories 461,000 504,000
Prepaid expenses 9,000 40,000
---------- ----------
Total current assets 763,000 922,000
FIXED ASSETS 942,000 $1,053,000
---------- ----------
$1,705,000 $1,975,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Notes payable and current maturities of long-term debt $ 226,000 $ 240,000
Accounts payable 632,000 502,000
Accrued wages and benefits 335,000 413,000
Accrued commissions and marketing 119,000 446,000
Other accrued expenses 114,000 110,000
---------- ----------
Total current liabilities 1,426,000 1,711,000
LONG-TERM DEBT 769,000 373,000
SHAREHOLDERS' EQUITY (DEFICIENCY) (490,000) (109,000)
---------- ---------
$1,705,000 $1,975,000
========== ==========
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
INTERNATIONAL FOOD AND BEVERAGE, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
Nine Months Three Months Six Month
Ended Ended Ended
March 30, April 1, December
1996 1995 1994
----------- ------------ ---------------
(Unaudited) (Unaudited) (Unaudited)
(Predecessor-Note2)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (381,000) $ (212,000) $(1,583,000)
Adjustments to reconcile net loss to net cash
used by operating activities
Depreciation and amortization 126,000 42,000 304,000
Deferred interest on short and long-term debt 111,000
Changes in assets and liabilities:
Accounts receivable (72,000) 77,000 297,000
Inventories 43,000 51,000 (72,000)
Prepaid expenses 31,000 8,000 23,000
Accounts payable 129,000 (39,000) 19,000
Accrued wages and benefits (77,000) (31,000) 31,000
Accrued commissions and marketing (327,000) (145,000) 125,000
Accrued expenses 4,000 (28,000) (305,000)
---------- ---------- -----------
Net cash used by operating activities (524,000) (277,000) (1,050,000)
---------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets (15,000) (83,000)
Cash used to satisfy net acquired liabilities
of predecessor company (290,000)
---------- ---------- -----------
Net cash used by investing activities (15,000) (290,000) (83,000)
---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable 456,000 700,000
Principal payments on notes payable (74,000) (24,000) (48,000)
---------- ---------- -----------
Net cash provided by (used in)
financing activities 382,000 (24,000) 652,000
---------- ---------- -----------
NET INCREASE (DECREASE) IN CASH (157,000) (591,000) (481,000)
CASH AND CASH EQUIVALENTS, beginning of year 192,000 800,000 481,000
---------- ---------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 35,000 $ 209,000 $ 0
========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period
Interest $ 19,000 $ 5,000 $ 5,000
Income taxes 0 0 0
See accompanying notes.
-3-
</TABLE>
<PAGE>
INTERNATIONAL FOOD AND BEVERAGE, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Financial Statements
In the opinion of management, the accompanying financial
statements, which have not been audited by independent public
accountants, reflect all adjustments necessary to present fairly
the data for the periods presented therein. The results of
operations for the nine month period ended March 30, 1996 are not
necessarily indicative of the results that may be expected for
the entire fiscal year ending June 29, 1996.
Note 2 - Change in Control
A change in control transaction occurred December 31, 1994 and
was recorded in conformity with Accounting Principles Board
Opinion No. 16. Accordingly, assets and liabilities as of
January 1, 1995 were restated and the results of operations since
that time reflect the "push-down" of the new controlling
shareholder's basis, minority interest at its historical basis,
and the consideration received from the former controlling
shareholder. See footnotes to the audited financial statements
for a more detailed description of the transaction.
<PAGE>
INTERNATIONAL FOOD AND BEVERAGE, INC.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The change in control and utilization of purchase accounting as
of January 1, 1995 has resulted in the accompanying statements
for the nine months ended March 30, 1996 being non comparable
versus the prior year corresponding period. Accordingly, the
following discussion addresses historical results in periods
since January 1, 1995. Given the current sales mix seasonality
is not a material factor in the Company's revenue trends.
Revenues for the three month period ended March 30, 1996 were
roughly comparable to revenues for the immediately preceding
quarter ended December 30, 1995 and had declined by $337,000
versus the prior year three month period ended April 1, 1995.
Substantially all of the revenue decline versus the prior year
period was due to the loss in May 1995 of a single division of
the Company's largest retail customer. This division has
recently reversed its pizza buying decision and resumed purchases
from the Company beginning late in March 1996. The Company
continues to market its pizzas and crusts nationally to retail
supermarket service delicatessen customers and major foodservice
accounts. The Company also contract manufactures for a customer
who sells to both domestic retail chains and export customers.
Beginning in May 1996 the Company will launch a private label
program producing a line of pizzas to be sold in the frozen food
section of a major national grocery retailer.
The gross profit margin of 14.2% for the three months ended March
30, 1996 was roughly comparable to the profit margin of 15.2%
reported for the immediately preceding quarter ended December 30,
1995. This compares with a gross profit of 22.6% for the prior
year comparable three month period. Gross profit for the nine
month period ended March 30, 1996 was 17.4%. The decline versus
the prior year is due primarily to the loss of the retail
division previously mentioned. Current year margins in the past
nine months reflect cost reduction improvements combined with
gains in operating efficiencies, offset by higher material costs
(principally in cheese) that have occurred over the past six
months. Fixed overhead per unit sold remains high at the
company's low level of production. The Company projects an
increase in its gross profit contribution rate assuming the
Company is able to achieve increased production volume and would
be further benefited if cheese prices return to historical price
levels.
Selling, general and administrative expenses for the Company's
first, second and third fiscal quarters ended March 30, 1996 were
substantially constant in dollars and as a percent of sales.
These operating expense levels reflect an improvement in fixed
overhead of approximately $75,000 per month resulting from
restructuring and cost containment efforts initiated early in
calendar 1995. The Company does not anticipate having to add
back these fixed overhead costs in support of revenue growth
approaching double its current level assuming a similar mix of
products and customers.
The resulting loss for the three month period ended March 30,
1996 of $153,000 versus reported losses of $176,000 for the
immediately preceding quarter ended December 30, 1995 and
$212,000 for the three month period ended April 1, 1995.
Liquidity and Capital Resources
Net cash used by operating activities was $524,000 for the nine
month period ended March 30, 1996. Management believes that the
Company becomes cash positive from operations at a monthly
revenue rate between $650,000 and $750,000 at current sales
prices and product mix.
In the period since July 1, 1995 the Company's principal
shareholder provided to the Company debt financing totaling
$355,000 the proceeds of which have been used for working
capital. In March 1996 the Company entered into a one year
$500,000 revolving line of credit agreement collateralized by
eligible accounts receivables and inventories. As of April 27,
1996 the outstanding borrowings under this credit facility was
$195,000. The Company believes that this credit facility will be
adequate to fund the Company's short term working capital
requirements. In future periods the Company may require
additional debt or equity capital to finance its operations.
There can be no assurance that the Company will be successful in
obtaining the necessary financing.
The Company's primary emphasis remains revenue generation through
increased sales to existing and new customers. It is also
aggressively evaluating opportunities ranging from contract
manufacturing for others to the acquisition of a synergistic
product line or company.
The foregoing Management's Discussion and Analysis contains
"forward looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Act of 1934, as amended, regarding management's
expectations concerning gross profit contribution, cheese prices,
volume and working capital requirements. The Company cautions
that these statements are further qualified by important factors
that could cause actual results to differ materially from those
in the forward looking statements, including, among others, the
following: reduced or lack of increase in demand for the
Company's products, competitive pricing pressures, changes in the
market prices of ingredients used in the Company's products and
the level of expenses incurred in the Company's operations.
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
(a) None.
(b) No reports on Form 8-K were filed during the three months
ended March 30, 1996.
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.
Date: May 10, 1996 INTERNATIONAL FOOD AND
BEVERAGE, INC.
/s/ Michael W. Hogarty
Michael W. Hogarty
President and Chief Executive
Officer
/s/ Ann M. Gooch
Ann M. Gooch
Vice President of Finance
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MAR-30-1996
10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-START> JUL-02-1995
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</TABLE>
