<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 September 28, 1996
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 33-43621
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INTERNATIONAL FOOD AND BEVERAGE, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0307734
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30152 Aventura, Rancho Santa Margarita, California 92688
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(Address of principal executive offices) (Zip Code)
(714) 858-8800
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(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
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The number of shares of Common Stock outstanding as of October 31, 1996
was: 156,589,351
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INTERNATIONAL FOOD AND BEVERAGE, INC.
FINANCIAL STATEMENTS AND OTHER INFORMATION
INDEX
PAGE NUMBER
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Operations
for the three months ended
September 28, 1996 and September 30, 1995 1
Balance Sheets as of September 28, 1996
and June 29, 1996 2
Statements of Cash Flows for the three months
ended September 28, 1996 and September 30, 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
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INTERNATIONAL FOOD AND BEVERAGE, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
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(Unaudited)
SEPTEMBER 28, SEPTEMBER 30,
1996 1995
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REVENUES $ 1,993,000 $ 1,576,000
COST OF SALES 1,603,000 1,229,000
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GROSS PROFIT 390,000 347,000
OPERATING EXPENSES:
Selling and distribution 334,000 259,000
General and administrative 141,000 137,000
Interest expense 31,000 4,000
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506,000 400,000
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NET LOSS $ (116,000) $ (53,000)
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NET LOSS PER COMMON SHARE $ (.00) $ (.00)
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WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 155,666,362 154,029,569
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See accompanying notes.
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INTERNATIONAL FOOD AND BEVERAGE, INC.
BALANCE SHEETS
SEPTEMBER 28, JUNE 29,
1996 1996
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(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 15,000 $ 20,000
Accounts receivable 326,000 505,000
Inventories 604,000 643,000
Prepaid expenses 4,000 7,000
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Total current assets 949,000 1,175,000
FIXED ASSETS 871,000 905,000
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$1,820,000 $2,080,000
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LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Notes payable and current maturities of
long-term debt $ 359,000 $ 429,000
Accounts payable 838,000 840,000
Accrued wages and benefits 344,000 373,000
Accrued commissions and marketing 174,000 181,000
Other accrued expenses 90,000 118,000
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Total current liabilities 1,805,000 1,941,000
LONG-TERM DEBT 730,000 756,000
SHAREHOLDERS' EQUITY (DEFICIENCY) (715,000) (617,000)
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$1,820,000 $2,080,000
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See accompanying notes.
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INTERNATIONAL FOOD AND BEVERAGE, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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(Unaudited)
SEPTEMBER 28, SEPTEMBER 30,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(116,000) $(53,000)
Adjustments to reconcile net loss to net
cash used by operating activities
Depreciation and amortization 39,000 42,000
Issuance of Common Stock under distribution agreement 18,000
Changes in assets and liabilities:
Accounts receivable 179,000 (93,000)
Inventories 39,000 (40,000)
Prepaid expenses 3,000 13,000
Accounts payable (2,000) 227,000
Accrued wages and benefits (29,000) (65,000)
Accrued commissions and marketing (7,000) (88,000)
Accrued expenses (28,000) 10,000
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Net cash provided by (used in) operating activities 96,000 (47,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets (5,000) (14,000)
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Net cash used by investing activities (5,000) (14,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable (96,000) (24,000)
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Net cash provided by (used in) financing activities (96,000) (24,000)
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NET INCREASE (DECREASE) IN CASH (5,000) (85,000)
CASH AND CASH EQUIVALENTS, beginning of year 20,000 192,000
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CASH AND CASH EQUIVALENTS, end of period $ 15,000 $107,000
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 19,000 $ 3,000
Income taxes 0 0
</TABLE>
See accompanying notes.
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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 three month period ended
September 28, 1996 are not necessarily indicative of the results that may be
expected for the entire fiscal year ending June 28, 1997.
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.
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INTERNATIONAL FOOD AND BEVERAGE, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues for the three month period ended September 28, 1996 of $1,993,000
increased approximately 26% when compared with revenues of $1,576,000 in the
prior year comparable period. This revenue increase resulted primarily from
the addition late in fiscal 1996 of new foodservice customers and an increase
in revenues in contract manufacturing for a customer who sells to both
domestic retail chains and export customers. The Company continues to market
its pizzas and crusts nationally to retail supermarket service delicatessen
customers and major foodservice accounts. Beginning in May 1996, the Company
began a private label program producing a line of pizzas being sold in the
frozen food section of a major national grocery retailer.
The gross profit margin of 19.6% for the three months ended September 28,
1996 declined versus the prior year comparable period gross margin of 22.0%.
The current year margin reflects higher material costs (principally in
cheese) offset only partially by improvements realized in operating
efficiencies and a higher level of overhead absorption. In the first quarter
of fiscal 1997 cheese, the Company's most significant ingredient cost, was at
unprecedented high levels with prices that were approximately 25% higher than
during the comparable prior year period. To offset the higher material costs
the Company has, where possible, raised prices. These price increases
however were primarily affected beginning late in fiscal 1996 and in certain
cases not until late September 1996. In addition, 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 given recent price
increases and assuming the Company achieves increased production volume.
Additionally, gross profit would be further benefited if cheese prices return
to historical price levels. In late October 1996 the price of cheese did
begin a downward trend but prices remain unpredictable.
Selling, general and administrative expenses for the quarter ended September
28, 1996 decreased as a percent of sales versus the prior year comparable
period to 23.8% from 25.1% primarily due to the increased revenues. The
Company does not anticipate having to add substantially to fixed overhead
costs to support revenue growth of fifty to one hundred percent of its
current revenue level assuming a similar mix of products and customers.
As a result of higher borrowings interest expense increased from $4,000 to
$31,000 for the current fiscal first quarter versus the comparable prior year
period. The resulting loss for the three month period ended September 28,
1996 was $116,000 versus a reported loss for three months ended September 30,
1995 of $53,000.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $96,000 for the three month
period ended September 28, 1996 versus cash used in operating activities of
$47,000 in the comparable prior year period. The cash provided by operations
was generated primarily from the reduction in accounts receivable and
inventories since June 29, 1996, the proceeds of which were used to satisfy
accounts payable and accrued expenses as well as pay down the Company's
revolving line of credit. Management believes that the Company becomes cash
positive from operations if it achieves a sustained average monthly revenue
rate of approximately $700,000 at current sales prices and product mix.
In March 1996 the Company entered into a $500,000 revolving line of credit
agreement collateralized by eligible accounts receivable and inventories.
Throughout most of September and October 1996 the outstanding borrowing under
this credit facility averaged approximately $300,000. The Company believes
that this credit facility will be adequate to fund the Company's short term
working capital requirements.
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.
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INTERNATIONAL FOOD AND BEVERAGE, INC.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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, the adequacy of funds from the existing credit
facility and the level at which the Company's operations become cash
positive. 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 price 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 September
28, 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: November 7, 1996 INTERNATIONAL FOOD AND BEVERAGE, INC.
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/s/ Michael W. Hogarty
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Michael W. Hogarty
President and Chief Executive Officer
/s/ Ann M. Gooch
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Ann M. Gooch
Vice President of Finance
(Principal Financial and Accounting Officer)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 28, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
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