<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 DECEMBER 28, 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
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The number of shares of Common Stock outstanding as of January 31, 1997
was: 156,599,351
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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 six months
ended December 28, 1996 and December 30, 1995 1
Balance Sheets as of December 28, 1996
and June 29, 1996 2
Statements of Cash Flows for the six months
ended December 28, 1996 and December 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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<TABLE>
INTERNATIONAL FOOD AND BEVERAGE, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
STATEMENTS OF OPERATIONS
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
(Unaudited) (Unaudited)
DECEMBER 28, DECEMBER 30, DECEMBER 28, DECEMBER 30,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 2,079,000 $ 1,433,000 $ 4,072,000 $ 3,009,000
COST OF SALES 1,618,000 1,215,000 3,221,000 2,444,000
----------- ----------- ----------- -----------
GROSS PROFIT 461,000 218,000 851,000 565,000
OPERATING EXPENSES:
Selling and distribution 379,000 247,000 713,000 506,000
General and administrative 151,000 139,000 292,000 276,000
Interest expense 29,000 8,000 60,000 12,000
----------- ----------- ----------- -----------
559,000 394,000 1,065,000 794,000
----------- ----------- ----------- -----------
NET LOSS $ (98,000) $ (176,000) $ (214,000) $ (229,000)
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE $ (.00) $ (.00) $ (.00) $ (.00)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 156,591,878 154,023,569 156,129,120 154,023,569
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
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INTERNATIONAL FOOD AND BEVERAGE, INC.
BALANCE SHEETS
DECEMBER 28, JUNE 29,
1996 1996
----------- ---------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 22,000 $ 20,000
Accounts receivable 571,000 505,000
Inventories 532,000 643,000
Prepaid expenses 5,000 7,000
---------- ----------
Total current assets 1,130,000 1,175,000
FIXED ASSETS 837,000 905,000
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$1,967,000 $2,080,000
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Notes payable and current maturities
of long-term debt $ 462,000 $ 429,000
Accounts payable 883,000 840,000
Accrued wages and benefits 379,000 373,000
Accrued commissions and marketing 236,000 181,000
Other accrued expenses 110,000 118,000
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Total current liabilities 2,070,000 1,941,000
LONG-TERM DEBT 710,000 756,000
SHAREHOLDERS' EQUITY (DEFICIENCY) (813,000) (617,000)
---------- ----------
$1,967,000 $2,080,000
========== ==========
See accompanying notes.
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INTERNATIONAL FOOD AND BEVERAGE, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
---------------------------
(Unaudited)
DECEMBER 28, DECEMBER 30,
1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (214,000) $ (229,000)
Adjustments to reconcile net loss to
net cash provided by operating activities
Depreciation and amortization 80,000 84,000
Issuance of Common Stock under
distribution agreement 18,000
Changes in assets and liabilities:
Accounts receivable (66,000) (138,000)
Inventories 111,000 60,000
Prepaid expenses 2,000 24,000
Accounts payable 43,000 343,000
Accrued wages and benefits 6,000 (48,000)
Accrued commissions and marketing 55,000 (343,000)
Accrued expenses (8,000) (9,000)
----------- -----------
Net cash provided by (used in)
operating activities 27,000 (256,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets (12,000) (25,000)
----------- -----------
Net cash used by investing
activities (12,000) (25,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable 39,000 190,000
Principal payments on notes payable (52,000) (49,000)
----------- -----------
Net cash provided by (used in)
financing activities (13,000) 141,000
----------- -----------
NET INCREASE (DECREASE) IN CASH 2,000 (140,000)
CASH AND CASH EQUIVALENTS, beginning of year 20,000 192,000
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 22,000 $ 52,000
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 57,000 $ 12,000
Income taxes 0 0
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 six month period ended December
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. The
historical acquisition cost of the company's fixed assets was approximately
$4,000,000, however, as a result of "push-down" accounting these assets are
reported currently on the Company's financial statements with a cost after
accumulated depreciation of $837,000. 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 six month period ended December 28, 1996 of $4,072,000
increased 35% when compared with revenues of $3,009,000 in the prior year
comparable period. Revenues for the most recent quarter increased 45% when
compared with revenues in the comparable three month period of the prior
year. The Company's business expanded with sales increases from retail
grocery, foodservice and contract manufacturing customers. In May 1996, the
Company introduced a line of pizzas which are sold under a private label
brand in the frozen food section of a major national grocery retailer. The
Company expects private label frozen pizza sales to continue to grow and
recently added a second major grocery retailer private label program with
initial shipments in February 1997. The Company does, however, expect a
decrease in its contract manufacturing sales due to product changes and
inherent uncertainties surrounding several of the contract manufacturer's
customers.
The gross profit margin for the six months ended December 28, 1996 increased
to 20.9% versus the prior year comparable period gross margin of 18.8%. In
the most recent three month period, gross profit margin increased to 22.2%
versus 15.2% in the comparable prior year period. The current year margin
improvements result from the decrease in cheese prices beginning late in
October 1996 to more normal historical pricing levels, a more favorable
customer mix purchasing higher margin products, and the benefit derived from
a higher level of overhead absorption as a result of increased sales.
Despite margin improvements, fixed overhead per unit sold remains high at the
Company's low level of production. The Company would realize an increase in
its gross profit contribution rate assuming the Company is able to achieve
increased production volume and ingredient prices remain stable.
Selling, general and administrative expenses for the six months as well as
the quarter ended December 28, 1996 decreased as a percent of sales versus
the prior year comparable periods to 24.7% and 25.5% from 26.0% and 26.9%,
respectively, primarily due to 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 in the current fiscal year, interest expense
for the six months and quarter ended December 28, 1996 increased to $60,000
and $29,000 from $12,000 and $8,000 for the comparable prior year periods,
respectively. The resulting loss for the six month and three month periods
ended December 28, 1996 was $214,000 and $98,000 versus reported comparable
prior year period losses of $229,000 and $176,000, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $27,000 for the six month
period ended December 28, 1996 versus cash used in operating activities of
$256,000 in the comparable prior year period. The cash provided by
operations during the current fiscal year was generated primarily from
additional balance sheet financing. Such cash together with a small increase
in the outstanding borrowings were adequate to finance nominal fixed asset
additions and service the Company's long term debt obligations during the
period. Management believes that the Company will experience positive cash
flow when it achieves a sustained average monthly revenue rate of
approximately $750,000 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 January and into February 1997 the outstanding borrowings under
this credit facility averaged approximately $450,000. The Company has
received from its lender a temporary approval for an increase in the line
limit to $550,000, subject to available collateral, with a request for a
permanent
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INTERNATIONAL FOOD AND BEVERAGE, INC.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
increase in the limit to $750,000 pending completion of their quarterly audit
and loan committee approval. At the Company's current level of operations
management believes that this credit facility will be adequate to fund the
Company's short term working capital requirements. There is no assurance
that the Company will be successful in obtaining the additional 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, the adequacy of funds from the existing credit
facility, the efforts to obtain an increase in the 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 unforeseen increases in 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 December
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: FEBRUARY 10, 1997 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)
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
28, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> DEC-28-1996
<CASH> 22
<SECURITIES> 0
<RECEIVABLES> 641
<ALLOWANCES> 70
<INVENTORY> 532
<CURRENT-ASSETS> 1,130
<PP&E> 1,166
<DEPRECIATION> 329
<TOTAL-ASSETS> 1,967
<CURRENT-LIABILITIES> 2,070
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<COMMON> 413
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<TOTAL-LIABILITY-AND-EQUITY> 1,967
<SALES> 4,072
<TOTAL-REVENUES> 4,072
<CGS> 3,221
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</TABLE>
