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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 29, 1997
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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 Identification No.)
incorporation or organization)
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 April 15, 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
Statement of Operations for the three months
and nine months ended March 29, 1997
and March 30, 1996 1
Balance Sheets as of March 29, 1997
and June 29, 1996 2
Statements of Cash Flows for the nine months
ended March 29, 1997 and March 30, 1996 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 NINE MONTHS ENDED
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MARCH 29, MARCH 30, MARCH 29, MARCH 30,
1997 1996 1997 1996
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(Unaudited) (Unaudited)
REVENUES $ 1,893,000 $ 1,375,000 $ 5,965,000 $ 4,384,000
COST OF SALES 1,449,000 1,179,000 4,670,000 3,623,000
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GROSS PROFIT 444,000 196,000 1,295,000 761,000
OPERATING EXPENSES:
Selling and distribution 364,000 214,000 1,077,000 720,000
General and administrative 146,000 120,000 438,000 396,000
Interest expense 36,000 14,000 96,000 26,000
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546,000 348,000 1,611,000 1,142,000
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NET LOSS $ (102,000) $ (152,000) $ (316,000) $ (381,000)
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NET LOSS PER COMMON SHARE $ (.00) $ (.00) $ (.00) $ (.00)
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WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES OUTSTANDING 156,599,351 154,033,569 156,285,864 154,027,854
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See accompanying notes.
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INTERNATIONAL FOOD AND BEVERAGE, INC.
BALANCE SHEETS
MARCH 29, JUNE 29,
1997 1996
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(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 57,000 $ 20,000
Accounts receivable 440,000 505,000
Inventories 580,000 643,000
Prepaid expenses 5,000 7,000
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Total current assets 1,082,000 1,175,000
FIXED ASSETS 844,000 905,000
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$ 1,926,000 $ 2,080,000
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LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Notes payable and current maturities
of long-term debt $ 412,000 $ 429,000
Accounts payable 1,070,000 840,000
Accrued wages and benefits 338,000 373,000
Accrued commissions and marketing 182,000 181,000
Other accrued expenses 142,000 118,000
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Total current liabilities 2,144,000 1,941,000
LONG-TERM DEBT 697,000 756,000
SHAREHOLDERS' EQUITY (DEFICIENCY) (915,000) (617,000)
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$ 1,926,000 $ 2,080,000
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See accompanying notes.
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INTERNATIONAL FOOD AND BEVERAGE, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
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MARCH 29, MARCH 30,
1997 1996
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(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (316,000) $ (381,000)
Adjustments to reconcile net loss to
net cash provided by operating activities
Depreciation and amortization 122,000 126,000
Issuance of Common Stock under
distribution agreement 18,000
Changes in assets and liabilities:
Accounts receivable 65,000 (72,000)
Inventories 63,000 43,000
Prepaid expenses 2,000 31,000
Accounts payable 230,000 129,000
Accrued wages and benefits (35,000) (77,000)
Accrued commissions and marketing 1,000 (327,000)
Accrued expenses 24,000 4,000
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Net cash provided by (used in)
operating activities 174,000 (524,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets (61,000) (15,000)
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Net cash used by investing activities (61,000) (15,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable 456,000
Principal payments on notes payable (76,000) (74,000)
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Net cash provided by (used in)
financing activities (76,000) 382,000
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NET INCREASE (DECREASE) IN CASH 37,000 (157,000)
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CASH AND CASH EQUIVALENTS, beginning of year 20,000 192,000
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CASH AND CASH EQUIVALENTS, end of period $ 57,000 $ 35,000
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 96,000 $ 19,000
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 nine month period ended March 29,
1997 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 $844,000. 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 nine month period ended March 29, 1997 of $5,965,000
increased approximately 36% when compared with revenues of $4,384,000 in the
prior year comparable period. Revenues for the most recent quarter increased
approximately 38% when compared with revenues in the comparable three month
period of the prior year. For the year to date period, each segment of the
Company's business expanded with sales growth to 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 recently added a
second major grocery retailer private label program with initial sales to
this customer made in late February 1997. The Company experienced a decrease
in its contract manufacturing sales during the most recent quarter as a
result of product changes for one of the contract manufacturer's domestic
customers and continuing uncertainties surrounding further shipments for
export. Accordingly, revenue increases during the most recent three month
period roughly offset the sales decline in contract manufacturing resulting
in revenues for the quarter which were nearly flat as compared with the prior
two fiscal quarters. The Company continues to market its pizzas and crusts
nationally to retail supermarket customers (service delicatessen and frozen
food sections) and major foodservice accounts.
The gross profit margin for the nine months ended March 29, 1997 increased to
21.7% versus the prior year comparable period gross margin of 17.4%. In the
most recent three month period, gross profit margin increased to 23.4% versus
14.3% 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 nine months and quarter
ended March 29, 1997 were roughly comparable as a percent of sales versus the
prior year comparable periods at 25.4% and 26.9% versus 25.5% and 24.3%,
respectively. Selling and administrative overhead remained relatively
constant in dollars through each of the comparable periods decreasing as a
percent of revenues given the sales increases, offset by increases in
commissions and marketing as a percent of revenues. These increases in
commissions and marketing expenses result from the continuing shift to higher
margin programs replacing contract manufacturing revenues that are priced
without commission or marketing. 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 nine months and quarter ended March 29, 1997 increased to $96,000 and
$36,000 from $26,000 and $14,000 for the comparable prior year periods,
respectively. The resulting loss for the nine month and three month periods
ended March 29, 1997 was $316,000 and $102,000 versus reported comparable
prior year period losses of $381,000 and $152,000, respectively.
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INTERNATIONAL FOOD AND BEVERAGE, INC.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $174,000 for the nine month
period ended March 29, 1997 versus cash used in operating activities of
$524,000 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 was 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 receivables and inventories.
Throughout April and into May 1997 the outstanding borrowings under this
credit facility averaged approximately $400,000 to $450,000. In April 1997,
the Company received from its lender approval for an increase in the line
limit to $750,000. 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 or that there are alternatives for
additional debt or equity financing, if required. There is no assurance that
the Company would be successful in obtaining the necessary 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 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 March 29,
1997.
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 12, 1997 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>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
29, 1997 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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